Elon Musk threatens to walk away from Twitter's $44 billion deal.  Here's why - my country |  Globalnews.ca

Elon Musk threatens to walk away from Twitter’s $44 billion deal. Here’s why – my country | Globalnews.ca

Elon Musk is threatening to walk away from his $44 billion bid to buy Twitter, accusing the company of refusing to provide him with information about its spam accounts.

Lawyers for the CEO of Tesla and SpaceX addressed the threat in a letter to Twitter dated Monday. This letter was included in a Twitter file with the Securities and Exchange Commission.

The letter says that Musk has repeatedly requested the information since May 9, about a month after he offered to buy the company, so that he could assess the number of fake accounts out of the company’s 229 million accounts.

Twitter Inc shares fell. By more than four percent on Monday, likely angering Twitter shareholders who sued Musk late last month to lower the share price. Twitter shares are down 23 percent in the past month.

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A message was left early Monday requesting comment from Twitter.

In the letter, the lawyers say that Twitter only offered to provide details about the company’s testing methods. But they emphasized that this “constitutes a refusal of Mr. Musk’s requests for data.” Musk wants data so he can do his own verification of what he says are Twitter’s lax methodologies.

Lawyers say that based on recent Twitter correspondence, Musk believes the company is resisting and thwarting his information rights under the merger agreement in April.

“This is a material breach of Twitter’s obligations under the merger agreement and Mr. Musk retains all rights arising therefrom, including his right not to complete the transaction and his right to terminate the merger agreement,” the letter says.

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Brian Quinn, a professor of law at Boston College, said Musk’s latest gambit shows how he is “looking for a way out of the deal or something that will gain leverage to renegotiate the price.” But Quinn said he is unlikely to appear in court because he has already waived his ability to request more due diligence.

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“I doubt he’ll let him go,” Quinn said. “At some point, the Twitter board will tire of this and file a lawsuit” asking the judge to force Musk to stick to the deal.

Twitter CEO Parag Agrawal said the company has consistently estimated that less than five percent of Twitter accounts are fake. Twitter has disclosed its bot ratings to the US Securities and Exchange Commission for years, while also warning that its ratings could be too low.

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The bot issue also reflects a long-standing installation of Musk, one of the most active Twitter users, whose name and likeness is often imitated by fake accounts promoting cryptocurrency scams. Musk seems to think that such bots are also a problem for most other Twitter users, as well as advertisers who display ads on the platform based on how many real people they expect to reach.

Experts said Musk couldn’t unilaterally suspend the deal, although that didn’t stop him from acting as if he could. If he goes too far, he could be in trouble for a $1 billion breakup fee.

The Twitter sale agreement allows Musk to exit the deal if there is a “material adverse effect” caused to the company. This is defined as a change that negatively affects Twitter’s business or financial conditions.

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The letter, signed by Musk’s attorney, Mike Ringler, who has copied other attorneys, points to a disagreement over a June 1 letter from Twitter in which the company said its information obligations were limited to facilitating the closing of the sale. It says Twitter is obligated to provide the 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 “reasonably required” by Musk, the letter said.

The letter confirms that Musk is not obligated to explain his justifications for the request for data or to be subject to “new conditions that the company tried to impose on his contractual right to the requested data.”

It claims that Musk has access to data about the core of Twitter’s business model so that he can prepare for the process of moving into his ownership.

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“If Twitter is confident in its reported estimates of spam, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to independently evaluate these estimates,” the letter says, adding that Musk agrees not to disclose or retain the data.

© 2022 Canadian Press

2022-06-06 15:13:57

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