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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowElon 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 CEO 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.
Shares of Twitter Inc. tumbled more than 5% at the opening bell Monday.
A message was left early Monday seeking comment from Twitter.
The 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.” 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.
Twitter CEO Parag Agrawal has said the company has consistently estimated that fewer than 5% of Twitter accounts are fake. Twitter has disclosed its bot estimates to the U.S. Securities and Exchange Commission for years, while also cautioning that its estimate might be too low.
The bot problem also 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.
In the letter, Musk attorney Mike Ringler points to a spat over a June 1 letter from Twitter in which the company said its information obligations are limited to facilitating the closing of 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.
The letter contends that Musk is not required to explain his rationale for requesting data or submit to “new conditions the company has attempted to impose on his contractual right to the requested data.”
It alleges that Musk is entitled to the data about the core of Twitter’s business model so he can prepare the transition to his ownership.
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…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…
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I believe they told him it was [at most] 5%. His response was that they should be doing things to shut the spambots down [and more than insinuated he knew of effective and efficient ways to do it]. Well, Mr. Musk: put your money where your mouth is. If you think you can do better, buy the company and make it happen. That will only cause the value of the company to climb. Of course, if you *do* back out, you still owe Twitter $1B.
Lol, I think he’s going to need more than “their word” that it’s only 5%
He’s now claiming it’s 90% — just trying to get their goat so they come back with a different number. Elon: just pay the $1B you owe and go home…
Wasn’t a large portion of his “campaign” to buy Twitter to get rid of bots?
Didn’t he realize that a large portion of accounts that interacted with his own Tweets were bots?
Didn’t he realize that buying a company whose business model is questionable for tens of billions of dollars would be a bad investment considering that he started his own companies for just a billion or two?
This was always a publicity stunt.
He is going through Due Diligence as an important part of any transaction. His requests are more than valid. Anyone in the comments section and/or reading this article would do no different as a part of a transaction. Attention to Detail is a critical element in the success of any company and in no way would I trust Twitter’s “approximate” 5% estimate…I would want to know for sure!! It is Twitter’s job to know their own numbers and if they don’t, which is evident by them taking a month to satisfy the DD request, my concern is that they are fabricating the data to support the $44B purchase price. Musk has a right to hesitate and demand transparency in this transaction.
You do due diligence BEFORE you sign the agreement letter…
There is legal precedence that will allow twitter to force the deal at the agreed upon price.
This is going to be a fun goat rodeo to watch
Amen James. I’m already enjoying my popcorn.
James M, +1.
Musk screwed up by (IIRC) signing a deal saying he was waiving the ability to do any more due diligence. The cheapest and best thing to do would be to pay the billion and walk away.
That he’s still going on like this makes me think his true motivation the entire time has been to blow up the company.
Needless to say, he’s not doing his public image as a master genius any favors.
In 1 week, Musk, the forward thinking tech guru, told his employees to go back to the office or they are fired, emailed every employee to say 10% of the white collar workers would be fired (because trillion dollar companies with 100k employees make strategic decisions based on “super bad feelings”) then walks it back with a Tweet, and is now manufacturing an issue to get out of a deal because his mouth and ego impulsively wrote a check he can’t cash. Is Musk every going to get called out as the child and a-hole that he is?