2:44 pm, June 7, 2022
Elon Musk has threatened to walk away from his $44bn (£35bn) bid to buy Twitter after accusing the company of refusing to give him information about its spam bot accounts.
The Tesla CEO’s lawyers made the threat in a letter to Twitter, dated Monday (June 6), and included in a filing from the social media platform with the US 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 229m accounts are fake.
The lawyers say in the letter that Twitter has offered only to provide details about the company’s methods for determining the number of accounts, and they contend that is ‘tantamount to refusing Mr Musk’s data requests’.
Musk wants underlying 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, the Tesla boss 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.
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.
Last month Musk said that he was unilaterally placing the deal on hold, which experts said he cannot do. If he walks away, he could be facing a $1bn break-up fee.
His latest manoeuvre 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 Prof Quinn said it is 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,’ Prof 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 CEO Parag Agrawal has said the company has consistently estimated that fewer than 5 per cent of Twitter accounts are fake. Twitter has disclosed its bot estimates to the US Securities and Exchange Commission for years, while also cautioning that its estimate might be too low.
‘If Twitter is confident in its publicised 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.
The bot problem is 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.
The letter signed by his lawyer Mike Ringler, that copied other lawyers, 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 co-operate with Mr 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 he 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 also 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.
