Elon Musk (Spacex CEO) believes that Twitter is materially in breach of their merger agreement. Therefore, he can terminate the deal. The social media giant has refused to provide critical information relating to spam and fake accounts on its platform, Musk’s legal team explained.
Elon Musk Might End His $44 Billion Tweet Buyout Deal
In a letter sent to Twitter Inc. Monday, which was also filed with the U.S. Securities and Exchange Commission (SEC), Elon Musk’s legal team wrote:
Twitter has … refused to provide the information that Mr. Musk has repeatedly requested since May 9, 2022 to facilitate his evaluation of spam and fake accounts on the company’s platform.
“Mr. Musk has made it clear that he does not believe the company’s lax testing methodologies are adequate so he must conduct his own analysis,” Musk’s lawyer added.
In the letter, Musk’s legal team stated that Twitter must provide Musk with the requested data under the merger agreement. Musk’s legal team further argued that the requested data is necessary to form a complete and accurate understanding of Twitter’s active user base, which is “the very core of Twitter’s business model.”
The Tesla CEO suspects that Twitter’s refusal to comply with the merger agreement obligations could mean “the company is withholding the requested data due to concern for what Mr. Musk’s own analysis of that data will uncover,” the lawyer detailed.
Furthermore, the Spacex boss believes that Twitter is “actively resisting and thwarting his information rights … under the merger agreement,” the letter describes, adding:
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.
According to Twitter’s proxy statement in April, Musk rushed to give his “best and final” offer of $44 billion without carrying out any due diligence. “Mr. Musk did not ask to enter into a confidentiality agreement or seek from Twitter any non-public info regarding Twitter,” the social media company said in its proxy. Twitter has used this reason to refuse Musk’s request for data.
Twitter user said Monday that social media giants can be held liable for misleading or omitting material facts. The user clarified that a waiver of due diligence doesn’t mean you must accept fraudulent disclosures, like an understated amount spambots.
Musk concurred, tweeting: “Correct.”
Musk complained about Twitter’s spambots for a while. He called it the “single most annoying problem” on Twitter, promising to solve the problem if he is successful in taking over the platform. “If our Twitter bid succeeds, we will defeat the spam bots or die trying!” he affirmed. Musk, who accepted his Twitter offer, has been discussing ways to fix the spambot problem, which includes using meme cryptocurrency dogecoin.
However, he announced last month that his Twitter buyout deal has now been put on hold, tweeting: “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” Musk believes that 20% or more of users are bogus.
Musk is required to pay Twitter $1 billion if he ends his $44B cash deal. If Twitter breaches the agreement, however, this fee will be adjusted.
Dan Ives, analyst at Wedbush believes Musk wants to end the agreement with the social media giant. Twitter’s Dan Ives tweeted Monday that he believed Musk would deny the claim.
We believe Musk wants to leave the deal.
Are you concerned that Twitter might be hiding something? Are you a believer that Elon Musk should be fired? Comment below to let us know your thoughts.
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