Musk threatens to walk away from Twitter deal
Elon Musk is threatening to walk away from his $44-billion bid to buy Twitter, accusing the company of refusing to give him information about its spam bot accounts.
Lawyers for the Tesla and SpaceX chief executive made the threat in a letter to Twitter dated Monday. That letter was included in a filing from Twitter with the Securities and Exchange Commission.
The letter says Musk has repeatedly asked for the information since May 9, about a month after his offer to buy the company, so he could evaluate how many of the company’s 229 million accounts are fake.
Twitter Chief Executive Parag Agrawal has said that Twitter has consistently estimated that fewer than 5% of its accounts are spam. But Musk has disputed that, contending in a May tweet, without providing evidence, that 20% or more are bogus.
Shares of Twitter Inc. slid 1.5% Monday, likely incensing Twitter shareholders, who filed a suit against Musk late last month for deflating the price of the stock. Shares of Twitter are down more than 20% in the last month.
Twitter said in a statement Monday that it has been cooperatively sharing information with Musk “in accordance with the terms of the merger agreement” and noted that the deal is in “the best interest of all shareholders.”
Elon Musk says his planned purchase of Twitter is “temporarily on hold” pending details on spam and fake accounts on the social media platform.
“We intend to close the transaction and enforce the merger agreement at the agreed price and terms,” it added.
Musk agreed to buy Twitter for $54.20 a share back in April. A number of Musk’s actions since, including a public spat with Twitter’s chief executive about the fake accounts — on Twitter — have led some experts to question whether the billionaire wants to use his loud complaints to negotiate a lower deal price or even walk away entirely.
Musk’s lawyers wrote in the letter that Twitter has offered only to provide details about the company’s testing methods. But they contend that’s “tantamount to refusing Mr. Musk’s data requests.” Musk wants data so he can do his own verification of what he says are Twitter’s lax methodologies.
The lawyers say that based on Twitter’s latest correspondence, Musk believes the company is resisting and thwarting his information rights under the April merger agreement.
“This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement,” the letter says.
The bot problem reflects a longtime fixation for Musk, one of Twitter’s most active celebrity users, whose name and likeness are often mimicked by fake accounts promoting cryptocurrency scams. Musk appears to think such bots are also a problem for most other Twitter users, as well as advertisers who take out ads on the platform based on how many real people they expect to reach.
Experts have said Musk can’t unilaterally place the deal on hold, although that hasn’t stopped him from acting as though he can. If he walks away, he could be on the hook for a $1-billion breakup fee.
The Twitter sale agreement allows Musk to get out of the deal if there is a “material adverse effect” caused by the company. It defines that as a change that negatively affects Twitter’s business or financial conditions.
Musk’s latest maneuver shows how he is “looking for a way out of the deal or something that will get leverage for a renegotiation of the price,” said Brian Quinn, a law professor at Boston College. But Quinn said it was unlikely to hold up in court since he already waived his ability to ask for more due diligence.
“I doubt he would be allowed to walk away,” Quinn said. “At some point, the board of Twitter will tire of this and file a suit” asking a judge to force Musk to stick to the deal.
Musk’s bot count skepticism was taken up Monday in Texas, where Tesla is headquartered. Atty. Gen. Ken Paxton, a Republican, said he’s starting an investigation because he has a “duty to protect Texans if Twitter is misrepresenting how many accounts are fake to drive up their revenue.”
