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Elon Musk threatens to walk away from Twitter deal

DETROIT — Elon Musk is threatening to back out of his $44 billion bid to buy Twitter, accusing the company of refusing to give him information about its spam bot and fake accounts.

Lawyers for the CEO of Tesla and SpaceX made the threat in a letter to Twitter dated Monday that the company disclosed in a filing with the United States Securities and Exchange Commission.

The lawyers wrote that Musk had repeatedly requested this information since May 9, about a month after his offer to buy the company, so he could assess how many of the company’s 229 million accounts are fake.

Twitter CEO Parag Agrawal said Twitter has always estimated that less than 5% of its accounts are spam. But Musk disputed that, saying in a May tweet, without providing evidence, that 20% or more is wrong.

Shares of Twitter Inc. fell 1.5% on Monday, likely infuriating Twitter shareholders who filed a lawsuit against Musk late last month for deflating the stock price. Shares of Twitter are down more than 20% in the past month.

Twitter said in a statement Monday that it was cooperatively sharing information with Musk “in accordance with the terms of the merger agreement” and noted that the deal was in “the best interests of all shareholders.”

Read more: Elon Musk, personality of the year 2021

“We intend to complete the transaction and implement the merger agreement at the agreed price and terms,” ​​he added.

Musk agreed to buy Twitter for $54.20 per share in April. A number of Musk’s actions since, including a public spat with the Twitter CEO over fake accounts – on Twitter – have some pundits wondering if the billionaire wanted to use his vocal complaints to negotiate a price. lower or even go away completely.

Musk’s attorneys wrote in the letter that Twitter only offered to provide details about the company’s testing methods. But they argue that this “amounts to denying Mr. Musk’s data requests” and constitutes a “material breach” of the merger agreement which gives Musk the right to rescind the deal if he chooses.

“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 wants the underlying data to do its own verification of what he says are Twitter’s lax methodologies.

The Twitter logo is seen outside its headquarters on April 26, 2022 in downtown San Francisco, California.

AMY OSBORNE/AFP via Getty Images

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. Twitter has always said it is proceeding with the deal, although it did not expect a shareholder vote on it.

Last month, Musk said he had unilaterally suspended the deal, which experts said he could not do. If he leaves, he could be liable for $1 billion in severance pay.

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 this and file a lawsuit” asking a judge to force Musk to stick to the deal.

Twitter has disclosed its bot estimates to the US Securities and Exchange Commission for years, while warning that its estimate may be too low.

Read more: A Complete Timeline of Elon Musk’s Business Efforts

“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,” Musk’s letter said, adding that he undertakes not to disclose or store the data.

The bot problem is a longtime fixation for Musk, who has more than 96 million Twitter followers and whose name and likeness are 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.

Musk’s attorneys argue he is entitled to data about Twitter’s core business model so he can prepare for the transition to ownership. Citing a June 1 letter from Twitter in which the company said it only had to provide information relating to the closing of the sale, Musk’s team said the company was obligated to provide data. for any reasonable business purpose necessary to complete the transaction.

Musk’s skepticism about the number of bots was also echoed on Monday by the chief legal officer of Texas, where Tesla is headquartered. Attorney General Ken Paxton, a Republican, said he was opening an investigation because he had a “duty to protect Texans if Twitter misrepresented the number of fake accounts to boost their revenue.”

Matt O’Brien reported from Providence, Rhode Island

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