Elon Musk is threatening to step away from his $ 44 billion bid to buy Twitter, accusing the company of refusing to give him information about his spam bot accounts.
Tesla and SpaceX CEO lawyers made the threat in a Twitter letter dated Monday. This letter was included in a Twitter presentation to the Stock Exchange Commission.
The letter says Musk has repeatedly requested information since May 9, about a month after the company’s takeover bid, in order to assess how many of the company’s 229 million accounts are fake.
Shares of Twitter Inc. they fell more than four percent on Monday, likely outraging Twitter shareholders who filed a lawsuit against Musk late last month for deflating stock prices. Twitter shares have fallen 23% in the last month.
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In the early hours of Monday, a message was left asking for comments on Twitter.
Lawyers say in the letter that Twitter has only been offered to provide details about the company’s trial methods. But they say this is “equivalent to rejecting Mr. Musk’s data requests.” Musk wants data so he can do his own verification of what he says are lax Twitter methodologies.
Lawyers say that based on the latest Twitter correspondence, Musk believes the company is resisting and frustrating its information rights under the April merger deal.
“This is a clear material breach of Twitter’s obligations under the Merger Agreement, and Mr. Musk reserves all rights arising therefrom, including his right not to complete the transaction and his right to terminate the merger agreement, “the letter reads.
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Musk’s latest maneuver shows how he is “looking for a way out of the deal or something that will gain influence for a price renegotiation,” said Brian Quinn, a law professor at Boston College. But Quinn said she is unlikely to stay in court as she has already given up her ability to ask for more due diligence.
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“I doubt he would be allowed to leave,” Quinn said. “At some point, the Twitter board will get tired of this and file a lawsuit,” asking a judge to force Musk to comply with the deal.
Twitter CEO Parag Agrawal has said the company has consistently estimated that less than five percent of Twitter accounts are fake. Twitter has been revealing its bot estimates to the U.S. Securities and Exchange Commission for years, while warning that its estimate could be too low.
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The bot’s problem also reflects a long-standing fixation by Musk, one of Twitter’s most active celebrity users, whose name and likeness are often imitated by fake accounts that promote cryptocurrency scams. Musk seems to think that these robots are also a problem for most other Twitter users, as well as for advertisers who post ads on the platform based on how many real people are waiting to arrive.
Experts have said that Musk cannot unilaterally suspend the agreement, although this has not prevented him from acting as if he could. If he leaves, he could be hit by a $ 1 billion breakout rate.
The Twitter sale agreement allows Musk to leave the deal if there is a “material adverse effect” caused by the company. He defines it as a change that negatively affects Twitter’s business or financial conditions.
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The letter, signed by Musk’s lawyer Mike Ringler, who copied other lawyers, points to a dispute over a June 1 Twitter letter in which the company said its information obligations are limited to providing closing the sale. It says Twitter is required to provide data for any reasonable commercial purpose necessary to complete the agreement.
Twitter must also cooperate with Musk’s efforts to secure funding for the deal, including information that Musk “reasonably requests,” according to the letter.
The letter states that Musk is not obliged to explain its reason for requesting the data or to submit to “new conditions that the company has tried to impose on its contractual right to the requested data.”
He alleges that Musk is entitled to data on the core of Twitter’s business model so that he can prepare for the transition to ownership.
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“If Twitter relies on its published spam estimates, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to evaluate these estimates independently,” the letter says, adding that Musk agrees not to disclose or retain data.
© 2022 The Canadian Press