Tesla Inc and SpaceX chief executive officer Elon Musk is threatening to walk away from his US$44 billion bid to buy Twitter Inc, accusing the company of refusing to give him information about its spam bot and fake accounts.
Lawyers for Musk made the threat in a letter to Twitter dated Monday that the company disclosed in a filing with the US Securities and Exchange Commission.
The lawyers wrote that Musk has repeatedly asked for the information since May 9, about a month after his offer to buy the company, so he could evaluate how many of the company’s 229 million accounts are fake.
Photo: AP
Twitter CEO Parag Agrawal has said that Twitter has consistently estimated that fewer than 5 percent of its accounts are spam.
However, Musk has disputed that, writing on Twitter last month that 20 percent or more are bogus.
Twitter said in a statement on Monday that it has been cooperatively sharing information with Musk “in accordance with the terms of the merger agreement” and that the deal is in “the best interest of all shareholders.”
“We intend to close the transaction and enforce the merger agreement at the agreed price and terms,” it said.
Musk agreed to buy Twitter for US$54.20 a share in April. A number of Musk’s actions since, including a public spat with Agrawal about the fake accounts — on Twitter — has led some experts to question whether the billionaire wants to use his loud complaints to negotiate a lower deal price or even walk away entirely.
Musk’s lawyers wrote in the letter that Twitter has offered only to provide details about the company’s testing methods.
However, they contend that is “tantamount to refusing Mr Musk’s data requests,” and constitutes a “material breach” of the merger agreement that gives Musk the right to scrap the deal if he chooses.
“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,” the letter says.
Musk wants underlying data to do his own verification of what he says are Twitter’s lax methodologies.
The Twitter sale agreement allows Musk to get out of the deal if there is a “material adverse effect” caused by the company. It defines that as a change that negatively affects Twitter’s business or financial conditions. Twitter has said all along that it is proceeding with the deal, although it has not scheduled a shareholder vote on it.
The company has disclosed its bot estimates to the commission for years, while also cautioning that its estimate might be too low.
“If Twitter is confident in its publicized spam estimates, Mr Musk does not understand the company’s reluctance to allow Mr Musk to independently evaluate those estimates,” the Musk letter says, adding that he agrees not to disclose or keep 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 mimicked by fake accounts promoting cryptocurrency scams.
Musk appears to think such bots are also a problem for most other Twitter users, as well as advertisers who take out ads on the platform based on how many real people they expect to reach.
Musk’s lawyers are arguing that he is entitled to data about the core of Twitter’s business model so he can prepare the transition to his ownership.
Citing a letter on Wednesday last week from Twitter in which the company said it only has to give information related to closing the sale, Musk’s team says the company is obligated to provide data for any reasonable business purpose needed to complete the deal.
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