Elon Musk has threatened to abandon his $ 44 billion acquisition of Twitter, complaining that the social media company has not provided enough information about spam and fake accounts.
Musk has repeatedly criticized Twitter’s claim that less than 5 percent of its daily monetizable active users are robots, and warned last month that its takeover “can’t move forward” unless the platform provides evidence.
In a letter to Twitter’s legal director that was revealed Monday in a regulatory filing, Musk’s lawyers in Skadden, Arps, Slate, Meagher and Flom wrote that the head of Tesla believes the company has “refused to provide the information that [he] he has asked repeatedly since May 9. ”
Since Musk and Twitter announced the deal in April, shares of Tesla along with high-growth tech companies have plummeted. Observers have noted that Musk, due to market turmoil, may try to find an excuse to reduce the transaction price or leave altogether.
Musk’s lawyers said Twitter “was actively resisting and frustrating its rights to information (and the corresponding obligations of the company) under the merger agreement” and that this “clear material breach of Twitter’s obligations “would allow Musk to terminate the merger agreement.”
The letter raises the idea that funding for the Wall Street bank deal could be at risk if Twitter does not provide the requested information. “As a potential Twitter owner, Mr. Musk is clearly entitled to the data requested to enable him to prepare for the transition of the Twitter business to his ownership and to facilitate the financing of his transaction.” Skadden wrote in his letter.
It is not easy for Musk to escape his obligation to close the transaction. A funding failure could provide a route, though it would still mean paying a $ 1 billion completion fee.
These legal maneuvers to get away from transactions rarely work, but Musk may be looking for bargaining leverage to force Twitter into a deal that would allow him to pay to escape buying the company.
A senior Wall Street lawyer who is not involved in the deal said: “It’s hard to see how funding sources need this information, as Twitter has been able to increase debt and equity so far, and they’re definitely not entitled to it. according to his letter of commitment .. But it is a kind of self-fulfilling prophecy in which Elon demands that he make the banks want it, etc. So, in fact, they can collude to ruin it.
Twitter shares were 4% lower Monday at $ 38, well below Musk’s $ 54.20 bid price.