Hey guys, it's sasha, elon musk has just said that the twitter deal is on hold and the twitter share price has immediately collapsed by 25. Recovering slightly in pre-market trading is elon about to pull out of the twitter deal. Well, here is what happened? Let me break it down for you and share some of the insights and thoughts on what the actual game being played is. This is quite important because, a few minutes ago, elon tweeted this twitter deal temporarily on hold pending details supporting calculation that spam fake account do.

Indeed, represent less than five percent of users and he quoted a two week old reuters article that references one small point made in the twitter quarterly report here is twitter's 10q form that was filed where the sec 2 is go on. May the 2nd, and in here inside this giant wall of text that 99 people probably didn't bother reading there is this bit buried in the middle. Furthermore, our metrics may be impacted by our information quality efforts, which are our overall efforts to reduce malicious activity on the service, inclusive of spam, malicious automation and fake accounts. For example, there are a number of false or spam accounts in existence.

On our platform, we have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the first quarter of 2022 represented fewer than five percent of our monthly daily active users during the quarter. The false or spam accounts for a period represent the average of false or spam accounts in the samples during each monthly analysis period. During the quarter. In making this determination, we applied significant judgment, so our estimation of force spam accounts may not accurately represent the actual number of such accounts and the actual number of false or spam accounts could be higher than we have estimated.

We are continually seeking to improve our ability to estimate the total number of spam accounts and eliminate them from the calculation of our monthly daily active users and have made improvements in our spam detection capabilities that have resulted in the suspension of a large number of spam. Malicious automation and fake accounts we intend to continue to make such improvements after we determine an account. Is spam, malicious automation or fake? We stop counting it in our monthly daily, active users or other related metrics. So twitter is saying that they think that the endless number of spambots that you see all over twitter comprise less than five percent of the total number of accounts and they have made, in their words, significant judgment to identify these accounts.

But despite their best efforts, they have added a massive caveat, because it says our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number according to them could actually be higher. To start with. Twitter reported 229 million daily active users in their q1 report and 5 percent of that is 11 and a half million accounts - and i don't know about you but 11 and a half million spambot accounts on a platform is approximately eleven and a half million too many And the problem here is that the majority of these accounts are not exactly difficult to identify a giant chunk of them are just so obvious. You see it everywhere.

Many of them literally go and copy the profile, pictures, names and descriptions of other people with weird funny characters, many of them endlessly spam the same messages over and over and over. It would probably take a below average iq monkey about three minutes to write some code to identify a giant chunk of these spam accounts. It isn't exactly difficult, but there is a problem, because if you were to suddenly go and identify spam accounts properly, then two things would happen. Both things twitter would not like at all.

First, the twitter platform, engagement, metrics, would go and collapse. They would drop because every time elon, musk or anybody else tweets, you wouldn't have the endless number of spam accounts immediately. Replying and less engagement makes it look like there are less users on the platform and that's bad for business. Advertisers are also going to pay less because they pay per impressions and spam accounts get a heck of a lot of impressions.

But even worse is the fact that next time twitter reports their quarterly results, they would have to go and show publicly show that massive drop in their actual user numbers if they just happen to go and delete a load of them. Imagine if the total number of bots was just five percent and imagine if twitter just decided to go and actually ban the bots instead of well, you know banning actual real people that they happen to just disagree with. If that happened, they would have to report a five percent drop in user numbers, which would send their share price completely crashing down and if, instead, after you know doing a little bit more work and a little bit more insight, they found out that the number is Not five percent but let's say 10 - that would completely wipe out the last two years worth of twitter's growth and naturally enough, when you're about to hand over 44 billion to go and buy twitter like elon, is you want to do a little bit of due diligence And elon musk wants to see something a little more solid than trust me bro, because that's about as much data as twitter has publicly shared on this, and the worst thing about this is that in the same q1 results twitter also said this in march of 2019, We launched a feature that allowed people to link multiple separate accounts together in order to conveniently switch between accounts. An error was made at that time.

Such that accounts taken via the primary account, resulted in all linked accounts being counted as monthly daily active users. This resulted in an overstatement of our monthly daily active users from q1 2019 through to q4 21. So twitter says trust me bro. Only five percent of total accounts are bots.

We did our best to count them, but then at exactly the same time they also say. Oh and we actually suck completely accounting user numbers, because we double counted of these. One percent of our total users for three years without realizing, doesn't exactly instill a huge amount of confidence. So twitter shares went completely off the cliff as soon as elon tweeted that the deal is now on hold.

The deal price that has been announced previously is 54.20, so, with the price now being way way lower trading in the 30s, the market is now panicking and significantly expecting that there is a big risk that the deal will not go through and the thing is elon Did know about the bots before it's not like. This is breaking news. It's not like he just found out, so why has he posted this and why now well? The stock market has had a massive sell-off that accelerated hugely in the last week or two and all growth stocks have completely tumbled. If twitter was not in the process of being acquired during this period, twitter itself would probably have followed the herd and probably lost a solid 30 or 40 of their share price, as many others have been and may well have been trading somewhere in the 20 to 30 dollar range and suddenly paying 54.20 would seem somewhat excessive, especially when elon is selling tesla stock to fund this purchase and the rest of his tesla stock is being used as collateral to fund the deal, and a few days ago on may 9th hindenburg research published A paper and said we are short twitter.

They said that because elon musk is holding the twitter board by the balls and has all the cards that they reckon he will go and renegotiate the deal and price. It lower. Quite an interesting opinion, though you know, because he can and elon musk went and replied to their tweet. Saying interesting, don't forget to look on the bright side of life, sometimes how very cryptic he then got a reply saying you could create a better platform for less than one billion dollars and then elon musk replied to that saying you might be right now.

It all sounded like a bit of a joke until today, because today the deal that elon musk has struck with twitter board means that he can go and walk away by just paying a one billion dollar fee and one billion dollars to walk away plus one billion To go and build a new platform if you use, that figure is a little bit less than the 44 billion dollars that he was planning to pay to buy twitter, and the events of these last few weeks have definitely given elon more than a bit of free Marketing, if he did decide to go and start his own platform, so why did he just bring up these spam bots what happened? Well, i think this is a bit of free leverage. He knows that the twitter board can't add up numbers, because there were double counting accounts in their reports for the last three years, and there is absolutely no way in hell that they would go and openly admit that their platform is written with bots. By confirming that more than five percent of users are potentially fake, so he knows that they suck at bluffing and he decided to go and push all of his chips into the middle of the table, because twitter are now backed into an impossible corner. They have no choice, in fact they do have a choice, but it isn't a very good choice if they play hardball and let the deal collapse, their platform is over, their share price is going to get destroyed.

Elon musk will probably then launch his own platform and use the leverage of his reach and his connections to build it up in extremely short time scales. Truth, social and potentially other competitors will also add into eating into twitter's market share in the process. So if the twitter bot do not renegotiate, they are going to destroy twitter and i am guessing some of the shareholders will not be very happy with that. So there's the potential threat of never-ending court cases and potential prison time both for the commercial outcome of this deal falling through and their conduct throughout it and for potentially misleading investors with statements in their 10q filings with the acc.

If it does eventually turn out that the bot problem is bigger than has been stated and elon now has a choice, does he want to buy twitter and renegotiate? A lower price seems like a good idea to get started with a ready-made platform that can be then improved and grown from there and skip the time required to develop and grow a brand new system. Or does he just throw away the one billion dollars cancellation fee and tell the twitter board to go and do one well we're going to have to wait and see? I am going to go and buy some more popcorn and i'm really looking forward to seeing what happens. If you found this video useful, please don't forget, smash like button for the youtube algorithm. Thank you so much for watching and as always i'll see you guys later,.