Source: Wall Street News
Tesla’s stock has nearly halved since Musk made his Twitter stake public, but it’s not over yet.
Amid a standoff between Musk and Twitter over acquisition progress, Twitter has yet again had bad news, this time with a fine by U.S. regulators over privacy concerns.
Twitter Chief Privacy Officer Damien Kieran announced Wednesday that it has agreed to accept new oversight and pay the Federal Trade Commission (FTC) $150 million to settle a federal privacy lawsuit, according to reports. Twitter is accused of deceptively using users’ emails and phone numbers and delivering targeted ads.
Court documents show that between May 2013 and September 2019, Twitter collected phone numbers and email addresses from users for account protection reasons. According to statistics, from 2014 to 2019, more than 140 million Twitter users provided their phone numbers or email addresses. But Twitter did not inform users that this information would be provided to advertisers for targeted advertising.
It is understood that advertising revenue accounts for 90% of Twitter’s average annual revenue. About $3 billion of Twitter’s $3.4 billion in revenue in 2019 came from advertising. The FTC pointed out that Twitter’s advertising strategy allegedly deceived users, brought Twitter huge advertising revenue, and violated a 2011 order on user data security and privacy.
In addition to the fines, Twitter must accept an audit of its data privacy program and other restrictions that prohibit profiting from deceptively collected data. Other measures include that Twitter must notify users of misuse of phone numbers and email addresses, and allow users to use other security verification methods, as well as establish data security mechanisms, and report data breaches to the FTC.
The settlement, which is still pending judicial approval, will take effect, and the $150 million fine represents about 3 percent of Twitter’s $5.08 billion in 2021 revenue. Previously, the FTC took a similar approach against Meta (formerly Facebook) in 2019, slapping the company with a $5 billion fine and other penalties.
Musk speaks out immediately after Twitter is fined
Musk wrote on Twitter on the 25th:
If Twitter is not true in this regard, what else is not true? This is very worrying news.
Musk, who has publicly criticized Twitter’s ad-driven model, expressed concern about the fine, which could again cloud his prospects of acquiring Twitter.
Musk announced on April 4 that he would buy Twitter for $44 billion. According to Tesla’s May 25 SEC filing, Musk has secured more financing to acquire Twitter, increasing the equity financing to $33.5 billion.
Earlier this month, Musk had already reduced the margin loan he received to pledge Tesla stock to $6.25 billion by bringing in co-investors. On Wednesday, Musk pledged an additional $6.25 billion in equity financing, which will directly reduce margin lending to zero.
Separately, Musk has secured $13 billion in loan commitments from banks.
Musk’s takeover bid reportedly won the backing of some of the world’s richest investors, including Oracle co-founder Larry Ellison, a self-described close friend of Musk, and Twitter investor Saudi Arabia, who earlier rejected the offer Prince Alwaleed bin Talal.
However, last week, Musk questioned the proportion of Twitter’s fake accounts, saying that he suspended the acquisition of Twitter and is waiting for more details to prove that the proportion of Twitter’s spam or fake accounts is indeed below 5% as Twitter said.
In the earnings report released on April 29, Twitter has disclosed a “bug” since the first quarter of 2019, which led to inflating the number of daily active users of the platform, and it has not been detected for nearly 3 years.
Therefore, at present, the proportion of Twitter fake accounts has become the focus of controversy between the two parties.
Shares tumble as Twitter shareholders collectively sue Musk for market manipulation
On Twitter’s side, Twitter shareholders have run out of patience and are collectively suing Musk and Twitter for their chaotic handling of the acquisition process, which has caused the company’s stock price to fluctuate wildly.
Shares of Twitter have fallen more than 12 percent since Musk made the offer on April 14, while Tesla shares have fallen about 28 percent. Since Musk first disclosed his Twitter holdings on April 4, Tesla’s shares have fallen more than 40% as of Wednesday’s close. It was also part of a broader sell-off in tech stocks.
In a proposed class-action lawsuit filed Wednesday, Twitter shareholders accuse Musk of violating California corporate law on multiple fronts and involving “market manipulation.” In a potential breach, they allege that Musk gained financial gain by delaying the disclosure of his Twitter stake and by temporarily concealing his plans to become a member of the company’s board in early April.
The indictment alleges that Musk had previously learned insider information about the company through private conversations with Twitter board members and executives, which may have been linked to his snapping up Twitter stock before making a takeover offer , including Musk’s longtime friends, Twitter Former CEO Jack Dorsey and Twitter board member private equity firm Silver Lake co-CEO Egon Durban, whose firm had invested in Tesla prior to its acquisition of SolarCity.
The indictment also alleges Musk violated California law by raising doubts about whether he would close the deal after he signed the acquisition contract. He added that his complaints about the “robot account” were part of his plan to negotiate a better price or end the deal.
The indictment states:
Musk has been making statements, tweeting, and making various moves to make the deal suspicious and drive down Twitter’s share price, with the ultimate goal of either creating an opportunity to exit the acquisition or providing negotiating leverage to buy Twitter at a discount of up to 25%. , if he succeeds, it will result in a reduction of about $11 billion in the purchase price.
Under California law, companies in the state must exclude board members from voting on proposals if they have misconduct in connection with or in connection with those proposals.
Dan Ives, an analyst at investment bank Wedbush Securities, said last week:
The soap opera continues this week, bring popcorn and a bench with you as there could be more twists and turns in this Twitter/Musk drama.
Editor/Corrine
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