Elon Musk has threatened to withdraw his $44 billion takeover bid for Twitter, claiming that the firm is withholding information on the amount of bot and spam accounts on the network. Musk’s attorneys said in a letter to the Securities and Exchange Commission on Monday that Twitter has refused to send over user data so Musk may evaluate the company’s user base. Bots account for around 5% of Twitter’s users, according to the company.
However, since the business and Musk agreed to a buyout in April, Musk has frequently questioned the bot number and wanted data to do his own verification. According to Musk’s attorneys, “Mr. Musk has made it plain that he does not feel the company’s lax testing techniques are appropriate, thus he must do his own study” to discover how many accounts are fraudulent. “The information he has sought is required to do so.”
Twitter has “refused to give the information that Mr. Musk has consistently sought since May 9, 2022,” according to the letter. According to the letter, Twitter has offered to explain its testing technique to Musk, which is “tantamount to denying” the data request. Musk would consider it a “material violation” of the agreement if Twitter does not send over the data, according to the letter, and will walk away from the arrangement.
According to the letter, “Mr. Musk feels that the business is deliberately rejecting and undermining his information rights (and the company’s related responsibilities) under the merger agreement.” According to the letter, Musk has the right “not to finalise the deal and his right to cancel the merger agreement.”
Twitter stated in a statement that it “has and will continue to communicate information with Mr. Musk in order to complete the acquisition,” and that it plans to enforce the merger agreement “at the agreed price and conditions.”
“I’m getting ready to go.”
“The clearest hint yet that the Tesla founder is poised to walk away from the $44 billion purchase,” according to the letter from Musk’s attorneys. In a research note, Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, stated, “The acquisition was always going to be rough, and this is a big pothole to cross for both sides.”
On Monday, Twitter’s stock dropped 3% before reclaiming some ground. The fact that the stock didn’t drop any further indicates that investors had reservations about Musk’s purchase from the outset, according to Streeter. Musk is also being sued by Twitter shareholders, who accuse him of causing the company’s stock price to plummet.
Last month, Musk placed the transaction “on pause” while confirming that the amount of bots Twitter said were on the network was correct, even engaging in a public Twitter spat with Twitter CEO Parag Agrawal. The move was perceived by Wall Street as an attempt to cut the deal’s price.
“Given the increased volatility in the tech industry since Mr. Musk made his offer,” Streeter said, “it’s extremely probable he’s wanting a lesser price, even if Twitter does produce the data required.” In April, Musk bid $54.20 per share for the firm. Since then, the stock market has plummeted, pulling down Musk’s personal fortune, which is heavily invested in Tesla shares. Twitter’s stock has dropped 23% in the last month.
Effects of “Material”
Musk is liable for a $1 billion cost if he fails to purchase Twitter under an acquisition agreement, and experts believe he can’t put the deal on hold unilaterally. Musk has been fixated on the bot issue for a long time. The world’s wealthiest individual is also one of the most active Tweeters, and phony accounts advertising cryptocurrency frauds often use his name and appearance. Musk seems to believe that bots are an issue for most other Twitter users, as well as marketers who buy Twitter advertisements based on the number of genuine people they anticipate reaching.
The Twitter selling agreement permits Musk to back out of the purchase if the firm has a “material detrimental impact.” This is defined as a move that has a negative impact on Twitter’s business or financial situation. Twitter has maintained its commitment to the transaction throughout, despite the fact that a shareholder vote has yet to be set.
The letter, written by Musk attorney Mike Ringler, refers to a letter from Twitter dated June 1 in which the business said that it only needs to provide information connected to the sale transaction. According to Ringler, Twitter is required to share data for any legitimate business purpose necessary to complete the transaction.
It claims that Musk is entitled to information about Twitter’s core business model so that he can plan the transition to his ownership, and that Twitter must cooperate with Musk’s efforts to secure financing for the deal, including providing information that Musk “reasonably requests,” according to the letter. Musk is not compelled to justify his request for data or adhere to “additional constraints the corporation has sought to place” on his ability to get the information, according to the letter.
Source: CBS News