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Elon Musk threatens to walk away from $44 billion Twitter deal

By Nagasunder in Business News, posted June 8, 2022

Elon Musk has threatened to withdraw his $44 billion bid for Twitter, accusing the business of withholding details on its spam bot and bogus accounts.

Tesla and SpaceX CEO's lawyers issued the warning in a letter to Twitter on Monday, May 9, and Twitter reported it in a filing with the US Securities and Exchange Commission.

In the letter, Musk claims he has frequently requested the information since Monday, May 9, roughly a month after his bid to acquire the social media firm, in order to assess how many of the company's 229 million accounts are false.

Twitter CEO Parag Agrawal has stated that the company has consistently calculated that less than 5 percent of its accounts are bogus. Musk, however, has contested this, claiming in a May tweet that 20 percent or more of the claims are false.

Twitter shares fell slightly under 3 percent on Monday, Jun 6, potentially incensing Twitter shareholders who sued Musk late last month for inflating the stock price. Twitter's stock has dropped 23 percent in the previous month.

Twitter said in a statement it: “has and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement.”

“We intend to close the transaction and enforce the merger agreement at the agreed price and terms,” it added.

Musk agreed to acquire Twitter in April for $54.20 per share.

A number of Musk's subsequent moves, including a public battle with Twitter's CEO about the bogus accounts — on Twitter — have prompted some experts to wonder if the billionaire intends to proceed with the transaction, or at the very least, how cheap his offer is.

Musk’s lawyers say 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,” and constitutes a “material breach” of the merger agreement that gives Musk the right to scrap the deal if he chooses.

“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.

Musk wants underlying data to do his own verification of what he says are Twitter’s lax methodologies.

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. Twitter has said all along that it’s proceeding with the deal, although it hasn’t scheduled a shareholder vote on it.

Last month Musk said that he unilaterally placed the deal on hold, which experts said he can’t do. If he walks away, he could be on the hook for a $1 billion breakup fee.

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’s 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.

Twitter has revealed its bot estimates to the U.S. Securities and Exchange Commission for years, while also cautioning that its estimate might be too low.

“If Twitter is confident in its publicized spam estimates, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to independently evaluate those estimates,” the Musk letter says, adding that he agrees not to disclose or keep the data.

Musk has long been concerned about the bot problem, as his name and picture are frequently imitated by bogus accounts advertising bitcoin schemes.

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Musk appears to believe that such bots are an issue for the majority of other Twitter users, as well as advertisers that place advertising on the network based on the number of genuine people they anticipate reaching.

The letter signed by Musk attorney Mike Ringler that copied other lawyers points to a spat over a Wednesday, June 1 letter from Twitter in which the company said it only has to give information related to closing the sale. It says Twitter is obligated to provide data for any reasonable business purpose needed to complete the deal.

Twitter also has to cooperate with Musk’s effort to get the financing for the deal, including providing information that’s “reasonably requested” by Musk, the letter states.

Source: Huffpost

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