When the deal last made headlines some four weeks ago, Twitter CEO Parag Agrawal had just granted the eccentric entrepreneur access to the social media platform’s “fire hose” of real-time data in order to prove fewer than 5% of its daily active users were bots, fake and spam accounts.  

On Thursday, however, the Washington Post reported the deal was now in “serious jeopardy.” According to its sources, advisers to the Tesla CEO concluded this figure could not be verified with any certainty and would result in a likely change in its strategy soon.

“Musk’s team has stopped engaging in certain discussions around funding for the $44 billion deal, including with a party named as a likely backer,” a source familiar with the matter told the paper.

Shares in Twitter were set to open more than 4% lower on Friday amid only light declines in the broader tech-heavy Nasdaq futures.

Bears and bots

As the S&P 500 plunged toward bear territory this spring, the world’s richest person suddenly began to link conditionality of the deal to Twitter’s reported bot estimate. 

Hindenburg Research notably warned about the downside risk to Twitter shareholders in May, only days before Musk unilaterally declared that he had put the deal on ice pending verification of the bot figure.

Speculation has since swirled over whether he would attempt to walk away from his $54.20 offer entirely by alleging Twitter’s deceptively low spam account figures constitute a “material adverse effect” to his expected investment returns.

Legal experts have warned, however, that under Delaware law, where Twitter is incorporated, Musk could find himself on thin ice with a judge, since he waived the right to due diligence when signing off on the acquisition deal with Twitter’s board in late April. 

Moreover, the social media platform’s management had already publicly stated its estimate of fewer than 5% is subject to “significant judgement” and could very well be higher, so Musk cannot claim he did not go into the agreement eyes wide open.

Since early June, the two seemed to be at an impasse: While Twitter insisted Musk follow through on his commitment, the Tesla CEO appeared to try to wriggle out of it—or at least negotiate more favorable terms. 

When Musk spoke last month to Twitter staff for the first time since he launched the bid, he brought no clarity to employees. During the town hall meeting, no one directly asked him whether he was committed to buying the company, and Musk chose not to volunteer any indication.  

Since then, the two sides appeared to go dark. Neither did Agrawal provide any further detail on its analysis of bots, nor did Musk launch any defamatory attacks on the Twitter CEO, his team or the veracity of the social media platform’s financial statements. 

‘Willing to go to war’

With so much uncertainty surrounding the deal, Twitter’s share price has unsurprisingly traded at a hefty 25% discount to Musk’s bid, suggesting investors are deeply skeptical over the deal proceeding at its original price.

That may in part be due to resistance from Musk’s own shareholders. The bid has become deeply unpopular among Tesla investors after he staked part of his shares in the carmaker as collateral for loans and sold off another portion to finance the deal. 

They also fear it is just one more unnecessary distraction for a CEO who already runs SpaceX when he’s not busy with Tesla. Any sign that the deal might be called off is therefore widely expected to trigger a relief rally in Tesla’s stock.

In a statement to the Washington Post, a spokesman for Twitter reaffirmed it would continue sharing information with Musk cooperatively and intended to “enforce the merger agreement at the agreed price and terms.” Tesla’s CEO had no response to a request for comment, it added.

The newspaper belongs to Jeff Bezos, a rival centibillionaire with his Blue Origin commercial space company and sizeable investment in Tesla competitor Rivian.

Separately, the Financial Times on Friday reported Twitter’s management is pressing to hold a shareholder vote on the deal by early August, with the CEO pushing back against Musk’s disparaging comments more aggressively in internal meetings.

With recessionary indicators on the horizon, there is a considerable risk that an advertisement-driven media company like Twitter will see its negotiating position steadily weaken. Typically the first response to an economic slump among companies is slashing ad spending.

“It seems Twitter is willing to go to war to make this deal happen,” the Post quoted a former Twitter executive as saying.