Elon Musk’s lawyers send a letter to Twitter threatening to terminate the $44 billion deal over inflated user data
Back in May, Tesl CEO Elon Musk said his $44 billion deal to buy Twitter will not move forward unless the social media giant shows public proof that less than 5% of the accounts on the social media platform are fake or spam.
Then last week, a new study from Israeli cybersecurity company CHEQ found that 12% of all traffic originating from Twitter is made up of bots. The study, which was first reported by Jerusalem Post, found that “up to 12% of all traffic originating from Twitter is made up of bots.”
The finding also gave Musk the ammunition he needed to back out of the $44 billion takeover deal. Some legal experts also said that Musk could also use the “inflated user data” as a bargaining chip to get a better deal.
Fast forward to today, Musk is now threatening to terminate the $44 billion deal if fake-account data is not provided. In what his lawyers described as Twitter’s lack of transparency over the inflated user data, Musk accused Twitter of “resisting and thwarting” his inquiries about how many fake, or bot accounts are currently on the Twitter platform.
Musk reportedly called Twitter’s unwillingness to provide the information a “clear material breach” of the terms of the agreement that is still under negotiation. As a result, Musk said he’s reserving his right to not complete the transaction.
In the letter to Twitter Chief Legal Officer Vijaya Gadde, Skadden attorney Mike Ringler for Musk said that “Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement,” according to CNBC.
He said further that Twitter must provide the information that is being requested, and that the merger agreement requires it. Ringler disputed Twitter’s claim that they are not responsible to give that data in order to close the deal.
“Mr. Musk is entitled to seek, and Twitter is obligated to provide,” Ringler wrote, “information and data for, inter alia, ‘any reasonable business purpose related to the consummation of the transaction.'”
“At this point,” Ringler continued, “Mr. Musk believes Twitter is transparently refusing to comply with its obligations under the merger agreement, which is causing further suspicion that the company is withholding the requested data due to concern for what Mr. Musk’s own analysis of that data will uncover.”
The letter, submitted to the SEC, stated that “If Twitter is confident in its publicized spam estimates, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to independently evaluate those estimates. As noted in our previous correspondence, Mr. Musk will of course comply with the restrictions provided under Section 6.4, including by ensuring that anyone reviewing the data is bound by a non-disclosure agreement, and Mr. Musk will not retain or otherwise use any competitively sensitive information if the transaction is not consummated.”
On April 25, Twitter agreed to sell the company to Elon Musk for $44 billion. Under the terms of the agreement, Twitter stockholders will receive $54.20 in cash for each share of Twitter common stock that they own upon closing the proposed transaction.
The purchase price represents a 38% premium to Twitter’s closing stock price on April 1, 2022, which was the last trading day before Mr. Musk disclosed his approximately 9% stake in Twitter. Musk needed to use his Tesla stock to raise $21 billion in equity to fund his takeover of the social media giant.
Under the terms of the agreement, Twitter stockholders will receive $54.20 in cash for each share of Twitter common stock that they own upon closing the proposed transaction. The purchase price represents a 38% premium to Twitter’s closing stock price on April 1, 2022, which was the last trading day before Mr. Musk disclosed his approximately 9% stake in Twitter.