DETROIT –
Elon Musk is threatening to turn down his $ 44 billion offer to buy Twitter, accusing the company of refusing to give him information about his spam bot and fake accounts.
Lawyers for the CEO of Tesla and SpaceX made the threat in a letter to Twitter on Monday, and Twitter revealed it in documentation to the US Securities and Exchange Commission.
The letter said Musk had repeatedly asked for information from May 9, about a month after his offer to buy the company, in order to estimate how many of the company’s 229 million accounts were fake.
Twitter CEO Parag Agraval said Twitter consistently estimates that less than 5% of its accounts are fake. But Musk disputed this, saying in a tweet in May that 20% or more were fake.
Shares of Twitter Inc. fell just under 3% on Monday, possibly angering Twitter shareholders who filed a lawsuit against Musk late last month for lowering stock prices. Shares of Twitter have fallen 23% in the last month.
A message was left early Monday seeking a comment from Twitter.
Musk agreed to buy Twitter for $ 54.20 a share back in April. A number of Musk actions since then, including a public dispute with Twitter’s CEO over fake Twitter accounts – have led some experts to question whether the billionaire wants to close the deal or at least reduce his bid.
Musk’s lawyers said in the letter that Twitter had only offered to provide details of the company’s testing methods. But they argue that this is “tantamount to denying Mr Musk’s data requests” and constitutes a “substantial breach” of the merger agreement, which gives Musk the right to cancel 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 merger agreement,” the letter said.
Musk wants the basic data to do his own test of what he says are Twitter’s weak methodologies.
The sale agreement on Twitter allows Musk to withdraw from the deal if there is a “significant adverse effect” caused by the company. He describes this as a change that negatively affects Twitter’s business or financial conditions. Twitter has been saying all along that it is continuing with the deal, although it has not scheduled a shareholder vote on it.
Last month, Musk said he had unilaterally postponed the deal, which experts say he cannot do. If he leaves, he could be on the hook for a $ 1 billion separation fee.
Musk’s latest maneuver shows him “looking for a way out of a deal or something that will get a price renegotiation lever,” said Brian Quinn, a law professor at Boston College. But Quinn said he was unlikely to endure it in court, as he had already given up his ability to ask for more due diligence.
“I doubt he’ll be allowed to leave,” Quinn said. “At some point, the Twitter board will get tired of this and file a lawsuit,” a judge asked the judge to force Musk to stick to the deal.
Twitter has been revealing its ratings for US Securities and Exchange Commission bots for years, while warning that its rating may be too low.
“If Twitter is confident of its spam ratings, Mr Musk does not understand the company’s reluctance to allow Mr Musk to rate those ratings independently,” Musk’s letter said, adding that he agreed not to discloses or stores data.
The problem with the bot is a long-standing fix for Musk, one of the most active users of celebrities on Twitter, whose name and likeness are often imitated by fake accounts promoting cryptocurrency fraud. Musk seems to think that such bots are a problem for most other Twitter users, as well as for advertisers who place ads on the platform based on how many real people they expect to reach.
A letter signed by Musk’s attorney, Mike Ringler, copying other attorneys points to a controversy over a June 1 letter on Twitter in which the company said it should only provide information related to the completion of the sale. It states that Twitter is required to provide data for any reasonable business purpose necessary to complete the transaction.
Twitter must also cooperate with Musk’s efforts to obtain funding for the deal, including providing information that is “reasonably requested” by Musk, the letter said.
The letter claims that Musk is not required to explain his justification for requesting data or to comply with “new conditions that the company has tried to impose” on his right to receive the numbers.
It claims that Musk has the right to data on the core of Twitter’s business model in order to prepare for the transition to his ownership.
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Matt O’Brien reported from Providence, Rhode Island
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