DETROIT — Elon Musk is threatening to walk away from his $44 billion bid to buy Twitter, accusing the company of refusing to give him information about his spam bot accounts.
Lawyers for the CEO of Tesla and SpaceX made the threat in a letter to Twitter dated Monday. This letter was included in a Twitter filing with the Securities and Exchange Commission.
The letter says Musk has repeatedly requested this information since May 9, about a month after he offered to buy the company, so he could assess how many of the company’s 229 million accounts are fake.
Shares of Twitter Inc. fell more than 4% on Monday, likely infuriating Twitter shareholders who filed a lawsuit against Musk late last month for deflating the stock price. Twitter shares are down 23% in the past month.
A message was left early Monday seeking comment from Twitter.
The lawyers say in the letter that Twitter only offered to provide details about the company’s testing methods. But they argue that this “equates to denying Mr. Musk’s requests for data”. Musk wants data so he can do his own audit 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 frustrating his rights to information under the April merger agreement.
“This is a clear 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 transaction. ‘merger agreement,’ the letter reads.
Musk’s latest move shows how he’s “looking for a way out of the deal or something that will have leverage for a price renegotiation,” said Boston College law professor Brian Quinn. But Quinn said he was unlikely to resist in court since he had already waived his ability to seek further due diligence.
“I doubt he’s allowed to walk away,” Quinn said. “At some point, Twitter’s board will get tired of it and take legal action,” asking a judge to force Musk to stick to the deal.
Twitter CEO Parag Agrawal said the company has always estimated that less than 5% of Twitter accounts are fake. Twitter has disclosed its bot estimates to the US Securities and Exchange Commission for years, while warning that its estimate may be too low.
The bot problem also reflects a long-standing fixation for Musk, one of Twitter’s most active celebrity users, whose name and likeness is often impersonated by fake accounts promoting cryptocurrency scams. . Musk seems to think these bots are also a problem for most other Twitter users, as well as advertisers who serve ads on the platform based on how many real people they expect to reach.
Experts said Musk couldn’t unilaterally suspend the deal, though that didn’t stop him from acting like he could. If he leaves, he could be liable for $1 billion in severance pay.
The Twitter sale agreement allows Musk to opt out of the deal if there is a “material adverse effect” caused by the company. He defines this as a change that negatively affects Twitter’s business or financial terms.
The letter signed by Musk’s attorney, Mike Ringler, who has copied other attorneys, cites a spat over a June 1 letter from Twitter in which the company said its reporting obligations will continue. limited to facilitating the closing of the sale. It states that Twitter is obligated to provide data for any reasonable business purpose necessary to complete the transaction.
Twitter must also cooperate with Musk’s efforts to obtain funding for the deal, including providing information “reasonably requested” by Musk, the letter said.
The letter claims that Musk is not required to explain his rationale for requesting the data or to submit to “new conditions that the company attempted to impose on his contractual right to the requested data.”
He alleges that Musk is entitled to data about Twitter’s core business model so he can prepare for the transition to his ownership.
“While Twitter is confident in its published spam estimates, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to independently assess these estimates,” the letter states, adding that Musk undertakes not to disclose or store the data.
O’Brien reported from Providence, Rhode Island.
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