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Elon Musk Says Twitter Deal on Hold Pending Details on Fake Accounts; Shares Sink 9%

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  • Twitter's stock plummeted 18% in premarket trading following the initial announcement, but trimmed some losses after the second tweet.
  • Musk announced last month that he intends to buy Twitter for $44 billion.
  • He's tweeted that one of his main priorities would be to remove "spam bots" from the platform.

Elon Musk announced Friday that his Twitter deal is on hold until he receives more information about how many fake accounts there are on the social media platform.

In a follow-up tweet around two hours later, Musk added that he was "still committed to the acquisition."

Twitter's stock plummeted 18% in premarket trading following the initial announcement, but trimmed some losses after the second tweet. Shares closed down 9.7%. A spokesperson for the social media company did not immediately respond to a CNBC request for comment.

Tesla CEO Musk announced last month that he intends to buy Twitter for $44 billion and he's previously tweeted that one of his main priorities would be to remove "spam bots" from the platform.

Even before Friday's announcement, the company's market value had fallen to $9 billion beneath the offer price due to concerns about the deal.

Musk, who is expected to serve as Twitter's temporary CEO if the deal goes ahead, would have to pay a $1 billion breakup fee should he choose to walk away. Musk is worth more than $220 billion.

Twitter estimated in a filing earlier this month that fewer than 5% of its monetizable daily active users during the first quarter were bots or spam accounts.

Musk, who is the world's richest person on paper, now wants the company to confirm this before he continues with the deal, which is being partly funded by Oracle co-founder Larry Ellison and venture capital firm Andreessen Horowitz.

The San Francisco-headquartered social media company said in the filing that it had 229 million users in the first quarter who were served advertising.

On Tuesday, Musk said that he would lift Twitter's ban on former President Donald Trump if he takes over the company.

"Permanent bans should be extremely rare and really reserved for accounts that are bots, or scam, spam accounts … I do think it was not correct to ban Donald Trump," Musk said at FT Live's Future of the Car conference. "I think that was a mistake, because it alienated a large part of the country and did not ultimately result in Donald Trump not having a voice."

Earlier this month, Bill Gates warned that Musk could make Twitter "worse." Speaking at The Wall Street Journal's CEO Summit, Gates said it's unclear how Musk will change Twitter if he takes ownership, while also raising concerns about the spread of misinformation on social media platforms.

Gates went on to question what Musk's goal is with Twitter and whether his drive to promote free speech is sensible. "What are his goals for what it ends up being? Does that match this idea of less extreme falsehoods spreading so quickly [and] weird conspiracy theories? Does he share that goal or not?" Gates said.

Before Musk made his bid to buy Twitter outright, he failed to disclose a more than 9% stake in the company within the SEC's mandatory 10-day window.

The Information reported that the Federal Trade Commission is probing the timing of Musk's disclosure. Bloomberg later said the FTC is separately reviewing the acquisition itself, though many experts don't expect the deal to raise antitrust concerns.

The FTC doesn't disclose ongoing investigations, and an FTC spokesperson declined to comment.

Tesla's share price climbed nearly 7% in premarket trading Friday.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said some are likely to query whether fake accounts are the real reason behind this delaying tactic.

"The $44 billion price tag is huge, and it may be a strategy to row back on the amount he is prepared to pay to acquire the platform," she said in a statement.

Additional reporting by CNBC's Lauren Feiner.

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