Elon Musk threatens to withdraw from Twitter deal


DETROIT — Elon Musk is threatening to walk away from a $44 billion Twitter takeover bid, accusing the company of refusing to disclose information about spam bot accounts.

Lawyers for the Tesla and SpaceX CEO made the threat in a letter to Twitter on Monday. This letter was included in a filing with the Securities and Exchange Commission from Twitter.

The letter states that Musk has repeatedly requested information since May 9, about a month after he offered to buy the company, so he can assess how many of the company’s 229 million accounts are fake.

Shares of Twitter Inc. fell more than 4% on Monday, possibly angering Twitter shareholders who sued Musk last month for lowering the share price. Shares of Twitter fell 23% last month.

Earlier on Monday, a message was left on Twitter asking for comment.

In the letter, the lawyers say Twitter only offered to detail the company’s testing methods. But they claim this is “equivalent to refusing Mr. Musk’s data requests”. Musk wants data so he can verify what Twitter says are loose methodologies.

Attorneys say, based on Twitter’s latest correspondence, that Musk believes the company is resisting and blocking information rights under the April merger deal.

“This is a flagrant breach of Twitter’s obligations under the merger agreement, and Mr. Musk reserves all rights arising from it, including the right not to complete the transaction and the right to terminate the merger agreement,” the letter states.

Brian Quinn, a law professor at Boston College, said Musk’s latest move shows how he was “looking for a way out of the deal, or something to take advantage of for price renegotiation.” But Quinn said it’s unlikely to stand in court, as she’s already waived her ability to request further due diligence.

“I doubt he’ll be let go,” Quinn said. Asking a judge to force Musk to stick to the settlement, “the Twitter board will get fed up with it at some point and will file a lawsuit”.

Twitter CEO Parag Agrawal said the company has consistently estimated that less than 5% of Twitter accounts are fake. While Twitter has disclosed its bot estimates to the U.S. Securities and Exchange Commission for years, it also warned that its estimate may be too low.

The bot issue also reflects a long-standing obsession for Musk, one of Twitter’s most active celebrity users, whose name and likeness are often spoofed by fake accounts that promote cryptocurrency scams. Musk seems to think that such bots are a problem for most other Twitter users, as well as for advertisers who advertise on the platform based on the number of real people they hope to reach.

Experts said Musk could not unilaterally suspend the deal, but that didn’t stop him from acting the way he could. If he walks away, he could be hooked for a $1 billion breakup fee.

The Twitter sales agreement allows Musk to withdraw from the deal if there is a “material negative impact” caused by the company. It defines this as a change that adversely affects Twitter’s business or financial conditions.

The letter, signed by Musk attorney Mike Ringler, who copied other attorneys, points to a June 1 letter from Twitter in which the company said its information obligations were limited to facilitating the sale’s closing. It says Twitter is obligated to provide data for any reasonable business purpose needed to complete the deal.

The letter also requires Twitter to cooperate with Musk’s effort to secure the financing of the deal, including by providing the information “reasonably requested”.

The letter claims that Musk does not need to explain the reason for requesting the data or submit to “new conditions that the company is trying to impose on its contractual right to the data requested.”

Musk allegedly has data on the core of Twitter’s business model so he can prepare the transition to ownership.

“If Twitter relies on publicly available spam estimates, Mr Musk doesn’t understand the company’s reluctance to allow Mr Musk to independently evaluate these estimates,” the letter states, adding that Musk has agreed not to disclose or store the data.

Copyright © 2022 The Washington Times, LLC.


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