Shares in Twitter Inc. dropped in late trading today after a report claimed that Elon Musk’s deal to acquire the company is in jeopardy due to issues with spam accounts.

The Washington Post, referencing three people familiar with the matter, said Musk’s camp has concluded that Twitter’s figures on spam accounts are not verifiable. The report also said Musk’s team has stopped engaging in certain discussions around funding for the deal, including with a party named as a likely backer.

The issue around spam accounts, specifically how many of Twitter’s claimed users are legitimate versus spam bots, was first raised by Musk (pictured) on Twitter on May 13. Musk wrote at the time that he was putting the “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” At a conference on May 16, Musk again raised his concern about spam accounts, saying that the number of fake accounts or spam bots that plague the platform could affect how much money he’s willing to spend on buying Twitter.

After Musk accused Twitter of being in “clear material breach” of the acquisition agreement on June 6 for not providing data on spam accounts, the company agreed to give Musk access to a “firehose” data stream on June 8. The data included the more than 500 million tweets that Twitter users post per day, including metadata, that could be used to ascertain the number of spam accounts.

The Post said Musk’s team has since raised doubts about the firehouse data provided by Twitter. Team members are said to doubt the spam figures and believe they do not have enough information to evaluate Twitter’s prospects as a business.

Given that the spam data can’t be verified, the report suggests that Musk’s team “is expected to take potentially dramatic action.” Exactly what that action would be is not specified, but one option on the table could see Musk pulling out of the deal.

Under the terms of the $44 billion acquisition agreement, agreed to by Twitter’s board on April 25, Musk must pay $1 billion to break the deal. That said, the Post claims that legal experts have said Twitter could try to force Musk to go through with the deal if the reason for backing out is not based on the company’s fundamental business.

Neither Twitter nor Musk has commented on the report. Shares in Twitter fell almost 4% after the bell.

Photo: SpaceX

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