Elon Musk’s planned takeover of Twitter is in “grave danger,” according to a report, sending the company shares 4% lower in off-hours operations on Wall Street.
Musk’s team has stopped certain discussions about financing the $ 44 billion deal, according to a report in the Washington Post, citing three people familiar with the matter. The report said Musk had concluded that Twitter figures on spam accounts, a point of discussion in the deal, were not verifiable.
Twitter executives on Thursday defended their spam policy, citing specialized equipment and automated processes that removed 1 million fake accounts a day, but the report claimed that access to the public data channel of tweets from the company had not yet satisfied Musk. Twitter has consistently claimed that less than 5% of its daily active users are spam accounts, a figure Musk openly doubts.
The report said there will likely be a “change of direction” for Musk soon, indicating that he will continue with threats to try to move away from the agreed deal.
However, legal experts said the richest man in the world, who is also the CEO of Tesla, would have trouble ending the takeover without a legal fight. The deal to buy Twitter contains clauses that include the search for a “specific performance,” which means asking a court in Delaware, the U.S. state that has jurisdiction over the deal, to order Musk to take term the agreement at the agreed price of $ 54.20 per share. The shares were priced at $ 37.10 in trading outside of hours.
“Eventually, the Twitter board will get tired of the crossovers and file a lawsuit for a specific performance in Delaware,” said Brian Quinn, an associate professor at Boston College Law School.
Twitter may also demand a $ 1 billion rest fee from Musk if it tries to deny the deal. However, last month there were indications of a legal strategy to withdraw when Musk’s lawyers sent a letter to Twitter warning that the refusal to cooperate on the issue of the spam account represented a “material breach” of the agreement. Musk’s legal team argues that not providing false account information violates a pact in the agreement, a promise to act in a certain way during the sale process, which would allow him to move away from the agreement.
Subsequently, Twitter has provided data for its 500 million daily tweets to reassure Musk, but the Washington Post report indicates that he is not satisfied with the results of his team’s subsequent analysis.
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Carl Tobias, Williams ’law professor at the University of Richmond, said the deal, which was in“ danger, ”was the latest iteration of the buyer’s remorse for Musk.
“The dust on the robots seemed to be pretextual to avoid having to give up the $ 1 billion breakout rate. So for weeks, Musk seemed to be saying he wasn’t comfortable with the deal and now it looks like he’s trying to withdraw from the agreement “.
A Twitter spokesman said: “Twitter has shared and will continue to share information cooperatively with Mr. Musk to complete the transaction in accordance with the terms of the merger agreement. We believe this agreement is in the best interest of all We intend to close the transaction and enforce the merger agreement at the agreed price and conditions. “