In a clear six-paragraph letter to Twitter on Monday, lawyers for Elon Musk, the world’s richest man, expressed his displeasure.
Twitter was “actively resisting and thwarting” Mr Musk’s rights as he completed a $ 44 billion deal to buy the social media service, lawyers said. The company “denied Mr. Musk’s data requests” to reveal the number of fake accounts on its platform, they said. This is a “clear substantial breach” of the deal, lawyers continued, giving Mr Musk the right to cancel the agreement.
The letter, which was delivered to Twitter and submitted to the Securities and Exchange Commission, escalated Mr Musk’s campaign to end the acquisition of the blockbuster. After concluding a deal to buy Twitter in April, Mr Musk, 50, has repeatedly speculated that he may want to refuse the purchase. Monday’s letter contained the most direct words so far about his desire to step down and crystallize his legal arguments.
This added another degree of uncertainty as to whether Mr Musk would complete the deal, although he waived his right to conduct a due diligence on Twitter when he bought it. The letter also raised the prospect of a disputed court battle if one or the other side takes the matter to court. If Mr. Musk follows this path, the terms of the deal give Twitter the right to sue him to force the completion of the acquisition if his debt financing for the purchase remains intact.
The letter also caused some rolling of the eyes. Mr. Musk, who runs electric car maker Tesla and rocket company SpaceX, is known as mercury and has often changed his course and deals, making his latest gambit not entirely unexpected.
“This is a move that Twitter investors have been hardened for weeks as Elon Musk’s random tweets were distilled in an official letter to regulators,” wrote Susanne Streetter, a senior investment and market analyst at Hargreaves Lansdown. . “The takeover has always been destined to be an unequal journey.”
Twitter said Mr Musk’s sale remains on track. “We intend to close the deal and enforce the merger agreement at the agreed price and terms,” a spokesman said, adding that the company would “continue to share information with Mr Musk to complete the deal.”
Behind the scenes, Twitter has been sharing information with Mr Musk for about a month without interrupting communication, said a person familiar with the situation, requesting anonymity as the discussions were confidential.
Sean Edgett, Twitter’s chief adviser, also sent an e-mail to employees Monday morning confirming the company’s commitment to close the deal, according to a copy of the note received by The New York Times.
Shares of Twitter fell 1.5 percent on Monday to close at $ 39.56, well below the $ 54.20 price a share Mr Musk agreed to pay for the company.
Mr Musk did not immediately respond to a request for comment.
Mr Musk, who has been complaining about fake Twitter accounts and bots for weeks, appears to have gained some attention with others. After Mr Musk’s letter to Twitter went public on Monday, Ken Paxton, Texas’s attorney general, said he was launching an investigation into the company “for potentially misleading Texans about the number of its bot users,” he said. office in a statement.
Twitter declined to comment on Mr Paxton’s investigation.
When Mr Musk agreed to buy Twitter in April, he said he wanted to make the company private, allow more freedom of speech on the platform and improve the service’s features. But in the coming weeks, the stock market collapsed amid fears of inflation, the war in Ukraine and the challenges of the supply chain.
The decline hit shares of companies such as Tesla, which is Mr Musk’s main source of wealth. The turmoil has also shaken credit markets, potentially making it harder for banks to sell debt, which is usually raised to finance takeovers. Analysts speculate that these factors have led to Mr Musk’s buyer’s remorse for spending $ 44 billion on social media.
In recent weeks, Mr Musk has threatened to keep the Twitter deal on hold due to the number of fake accounts. Last month, he tweeted that “the deal can’t go on” until Twitter showed “proof” that those accounts made up less than 5 percent of its users, as the company has repeatedly said. He also made similar remarks at a conference in Miami, showing that he may be trying to lay the groundwork for reworking the deal.
In doing so, Mr Musk appears to be arguing that Twitter has undergone a “significant adverse change” that will significantly affect its business, which could allow it to ruin the deal. Still, legal experts have questioned the merits of this argument, especially since Twitter has long revealed that fake accounts make up about 5 percent of its users.
However, Mr Musk’s letter on Monday is a new strategy. Instead of simply saying that the billionaire does not believe Twitter’s figures, his lawyers say in the letter that the company is violating its obligations by not giving Mr. Musk the information he considers important for the deal – in this case how she explains its number of bots.
Lawyers wrote that Mr. Musk “repeatedly” asked for more information on how Twitter measures spam and fake accounts on his platform, and that he “made it clear that he did not believe that the company’s weak testing methods were adequate, so you have to conduct your own analysis. “
How the Elon Musk deal unfolds on Twitter
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Blockbuster deal. Elon Musk, the richest man in the world, limited what seemed to be the incredible billionaire’s attempt to buy Twitter for approximately $ 44 billion. Here’s how the deal went:
The initial offer. Mr Musk has made an unwelcome bid of more than $ 40 billion for the influential social network, saying he wants to make Twitter a private company and wants people to be able to speak more freely on the service.
They said Twitter’s cooperation was needed to secure the debt financing that the banks had pledged to finance the deal. Morgan Stanley and other creditors have committed $ 13 billion in debt to help pay for Mr. Musk’s takeover. These commitments are governed by the same legal contracts as the transaction.
“What he’s actually doing is a much smarter attempt to get out of the merger agreement,” said Anne Lipton, a professor of corporate governance at Tulane Law School. “If Twitter really was an ambitious request for information and those requests for information were necessary or reasonable for Musk to get his funding – which he claims in this letter – then it would probably be a breakthrough that allows Musk to leave. ”
Twitter, for its part, may say it does not have the information Mr. Musk requires or that the deal does not need to be concluded, she said.
The deal is expected to be completed by October 24. If it is not completed by then, either party may withdraw. If the transaction is delayed by regulatory approvals at the time, Mr Musk and Twitter will have six more months to complete it. The deal includes a $ 1 billion fee for separation on both sides, subject to certain conditions.
In many ways, the agreement seems to be on track. Last week, Twitter announced it had received regulatory approval from the Federal Trade Commission to continue its sale.
In terms of financing, Mr Musk revealed in a paperwork last month that he had increased his personal financial commitment to the deal by canceling a planned loan against Tesla shares. He also said he was in talks with other Twitter shareholders, including company co-founder Jack Dorsey, to include their existing shares in the company once it became private.
For Twitter, closing the deal is existential. The company is facing difficulties in providing consistent financial results and increasing the number of its customers.
Parag Agraval, Twitter’s chief executive, cut the company’s discretionary spending last month and froze new hires. Since taking office in November, he has shaken the company’s top positions and has plans for more changes. He also asked the staff to try to follow the course.
“I know we are going through a period of uncertainty,” he said at a recent company meeting. “We’re shifting our focus back to our work.”
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