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Twitter is currently facing the classic Musk treatment of keeping his opponents and negotiating partners on their toes.
The CEO of Tesla had roiled the markets on Friday when he placed his Twitter takeover deal on a “temporary hold” while citing the need to gauge the exact proportion of bots or fake accounts that populated Twitter’s 229 million monetizable daily users in Q1 2022.
Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of usershttps://t.co/Y2t0QMuuyn
— Elon Musk (@elonmusk) May 13, 2022
Even though Musk had stated at the time that he was still “committed” to the deal, the CEO of Tesla recently revealed that he had received a call from Twitter’s legal team shortly thereafter for allegedly violating the Non-Disclosure Agreement (NDA). The call was prompted by a tweet from Musk where he revealed that Twitter’s in-house random sampling process used a sample size of 100. Bear in mind that Musk will have to pay $1 billion in breakup fees if the deal falls apart.
Any sensible random sampling process is fine. If many people independently get similar results for % of fake/spam/duplicate accounts, that will be telling.
I picked 100 as the sample size number, because that is what Twitter uses to calculate <5% fake/spam/duplicate.
— Elon Musk (@elonmusk) May 14, 2022
And here is Musk’s tweet revealing the details about that call:
Twitter legal just called to complain that I violated their NDA by revealing the bot check sample size is 100!
This actually happened.
— Elon Musk (@elonmusk) May 14, 2022
This brings us to the crux of the matter. We had noted on Friday that Musk’s suspension of the takeover deal might be a ploy to renegotiate a lower price for Twitter. Well, the latest tweet from Musk certainly adds confidence to this conjecture.
To wit, Musk has now speculated in a tweet that “over 90%” of Twitter’s daily active users might be bots or fake accounts.
There is some chance it might be over 90% of daily active users, which is the metric that matters to advertisers.
Very odd that the most popular tweets of all time were only liked by ~2% of daily active users.
— Elon Musk (@elonmusk) May 15, 2022
In order to bolster his case for such a high proportion of bots on the social media platform, Musk cited the fact that the most popular tweet on the platform received likes from around 2% of the social media giant’s daily active users. Of course, the exact proportion can be fairly easily gauged via a statistically sound random sampling test of sufficient sampling size.
As we had noted in our post on this subject on Friday, the short-seller Hindenburg Research has opened a short position on Twitter, citing the specter of takeover deal renegotiation. Musk’s latest tweets do give an inkling that he seems to be gunning for the same eventuality.
Of course, if that indeed is Musk’s true aim, then it is in the interest of the CEO of Tesla to try to hammer the social media giant's stock price. Perversely, the lower Twitter shares go, the stronger is Musk’s negotiation position.
Twitter shares closed Friday at $40.72, constituting a discount of around 25% relative to Musk’s offer price of $54.20 per share for the social media giant. As Musk’s negotiating position grows stronger in the coming days, expect this spread to widen.
