Image Source: AP News
On Monday, Elon Musk made his most blatant threat yet to back out of his purchase of Twitter (TWTR), accusing the social media company of breaking the merger agreement by refusing to provide data on spam and bogus accounts that he had asked for.
Musk claims that Twitter is “actively rejecting and undermining his information rights,” as described in the arrangement in a letter to Vijaya Gadde, Twitter’s head of legal, policy, and trust.
Mr. Musk reserves all rights arising from the scenario, including the right not to finalize the acquisition and the right to terminate the merger agreement, according to an attorney representing Musk in a strongly worded letter.
Musk has asked that Twitter provide over information regarding its testing procedures to back up its claims that bots and fake accounts make up less than 5% of the platform’s active user base, a figure it has stated in boilerplate public reports for years. Musk has also stated that he will conduct his own independent analysis using Twitter data.
In the early Monday trade, Twitter’s stock plunged 5%. However, even before this latest development, Twitter shares were trading considerably below Musk’s $54.20 per share acquisition offer, signaling investor uncertainty about the deal’s success.
Parag Agrawal, Twitter’s CEO, has defended the company’s spam metric. In a statement released on Monday, Twitter’s CEO reaffirmed the company’s commitment to sharing information constructively to complete the merger according to the merger agreement’s provisions.
“Close the deal and enforce the merger agreement at the agreed price and parameters,” the business added.
According to Musk, the true number of spam accounts is likely to be significantly higher, possibly as high as 90%. As a result, the deal “cannot proceed forward” until the business delivers “evidence” of its spam metric, Musk has previously stated.
Some Wall Street experts believe the resistance is a case of buyer’s remorse and an attempt to force Twitter to decrease its $44 billion acquisition price. There have been concerns about Musk’s ability to fund the deal from the start. As a result, social media stocks have taken a knock in recent weeks, along with broader market worries.
According to Monday’s letter, Twitter may be “withholding the requested data out of fear of what Mr. Musk’s own examination of that data will reveal.”
According to the letter, Twitter attempted to limit access to the information by applying a restrictive interpretation of the merger agreement, claiming that sharing the information would fall outside of Twitter’s contractual obligations. However, the letter claimed that even if Twitter’s definitions are narrowed, it is still required to provide the information.
Musk waived a due diligence clause in the deal, which might have made it easier for him to walk out; without it, Musk could face a steeper climb and the possibility of litigation, according to a separate securities filing by Twitter.
Musk has made spam bots on the platform a primary concern in his agreement to purchase Twitter. Even as he praised Twitter as critical to “the future of civilization,” he has threatened to fight them or “die trying.”