Elon Musk revealed on Friday that his $44 billion Twitter takeover has been temporarily put on hold as the company investigates how many of its user accounts are fake.
Citing a two-week old Reuters report that said Twitter estimated spam and fake accounts made up less than 5% of its users, Musk said his deal was being paused as he waited for details to support the calculation of the figure.
He added in a separate tweet two hours later that he was “still committed to [the] acquisition.”
Twitter shares were down by around 20% in premarket trading on Friday.
In a filing back in April, Twitter said fake accounts represented less than 5% of monetizable daily active users in the first quarter of this year.
Musk, who has said he wants to make Twitter “a platform for free speech,” has been critical in the past about the number of bots, or fake accounts, posting on the social media platform.
Twitter shares plummeted in the days following the announcement that Musk’s takeover bid had been accepted, and have taken another tumble in recent trading sessions as the tech sector continues to suffer from a sharp selloff.
The decline in the company’s shares means Twitter is now valued at around $34.4 billion—$10 billion less than Musk’s agreed takeover price.
Shares plunged to $36.27 in premarket trade after Musk revealed the deal was being paused—making them around 33% less valuable than the $54.20 he offered to pay per share back in April.
‘An excuse to withdraw gracefully’
Analysts at Wedbush said Friday that Musk’s pausing of the deal was a bizarre “circus show move,” noting that Wall Street was now likely to put chances of the deal happening at less than 50%.
“The Street will view this deal as 1) likely falling apart, 2) Musk negotiating for a lower deal price, or 3) Musk simply walking away from the deal with a $1 billion breakup fee,” they said in a note.
Wedbush’s analysts added that if Musk still decides to go down the deal path, a clear renegotiation is likely on the table, which calls various matters into question, including financing, the leverage of Tesla stock, prior financing partners, and employee reaction.
“Many will view this as Musk using the Twitter filing as a way to get out of this deal in a vastly changing market,” they said. “The nature of Musk creating so much uncertainty in a tweet [and not a filing] is very troubling to us, and sends this whole deal into a circus show with many questions and no concrete answers as to the path of this deal going forward.”
Meanwhile, John Colley, associate dean at Warwick Business School and a former managing director of a FTSE 100 company with experience in mergers and acquisitions, told Fortune that Musk’s latest move suggested he may be rethinking his colossal acquisition of Twitter.
“Is Elon Musk having second thoughts on buying Twitter? ‘Fake accounts’ were always a likely issue, but didn’t dissuade him from launching his bid,” he said in an email on Friday.
“Bringing it up now may just be an excuse to withdraw gracefully.”
Colley added: “Maybe the true cost and extent of the risk involved in turning around a ‘break even’ Twitter may have dawned on Elon Musk. After all, $44 billion for what may be little more than a sideline does seem excessive. The collapse in Tesla’s shares following the original offer announcement underlines what the markets think.”
Risk of deal dying
Even before Musk said he was pausing the deal, investors were apprehensive about whether or not his takeover would go ahead, with some warning that “there is elevated risk that this doesn’t go through.”
Tesla shares—which Musk was planning to use as leverage in the Twitter deal—have also suffered as a result of both Musk’s latest venture and the tech selloff.