Elon Musk Threatens to End Twitter Deal Without Information on Spam Accounts

In a scathing, six-paragraph letter to Twitter on Monday, lawyers for the world’s richest man, Elon Musk, expressed their displeasure.

Twitter was “actively resisting and failing.” Musk’s rights when he was completing a $ 44 billion deal to buy the social media service, lawyers wrote. The company was refusing “Mr. Musk’s data requests” to reveal the number of fake accounts on its platform, they said.

The letter, which was distributed on Twitter and filed with the Securities and Exchange Commission, was sent to Mr. Musk’s campaign to end blockbuster acquisitions. After making a deal to buy Twitter in April, Mr. Musk, 50, has repeatedly indicated he wants to scrap the purchase. Monday’s letter contained the most direct words about his desire to be extradited and crystallized his legal argument for doing so.

That Mr. Musk will complete the deal, although he relinquished his rights to do the right thing on Twitter when he bought it. The letter also raises the possibility of a controversial legal battle if one side or the other takes the matter to court. If Mr. Musk pursued that path, the terms of the deal giving Twitter the right to sue for forcing it to complete the acquisition, if its debt financing for the purchase remains intact.

The letter also had some eye openers. Mr. Musk, who heads electric car maker Tesla and rocket company SpaceX, is famously mercurial and often wings his wheeling and dealing, making his latest gambit completely unpredictable.

Susannah Streeter, senior investment and market analyst at Hargraves Lansdowne, wrote: “This is a move that Twitter investors have been consolidating for weeks now, while Elon Musk’s haphazard rumors in tweets have been refuted in an official letter to regulators.” “The takeover was always destined to be a bumpy ride.”

Twitter said the sale to Mr. Musk stayed on the course. “We intend to close the transaction and enforce the merger agreement on the agreed price and terms,” ​​he said, adding that the company would “continue to share information cooperatively with Mr. Kasturi to complete the transaction.”

Behind the scenes, Twitter has shared information with Mr. Kasturi said the discussions were confidential, with a person familiar with the situation requesting not to be named, without a break in the conversation for about a month.

Twitter’s General Counsel Sean Aget sent an email to employees Monday morning reiterating the company’s commitment to closing the deal, according to a copy of the memo obtained by the New York Times.

Shares of Twitter fell 1.5 percent to close at $ 39.56 on Monday. Musk agreed to pay for the company.

Mr. Musk did not immediately respond to a request for comment.

Mr. Musk, who has fake Twitter accounts and bots for weeks, gets little traction on the issue with others. After Mr. Musk’s letter on Twitter went public on Monday, with Texas Attorney General Ken Paxton saying he was “investigating the company for potentially misleading Texans on the number of its ‘bot’ users,” his office said in a statement.

Twitter declined to comment on Mr. Paxton’s investigation.

When Mr. Musk agreed to buy Twitter in April, saying he wanted to privatize the company, allow more free speech on the platform and improve service features. But in the weeks since, the stock market has plummeted due to fears of inflation, war in Ukraine and supply chain challenges.

The downturn has hit shares of companies like Tesla, which Mr. Musk is the main source of wealth. The upheaval has also sent shockwaves through the credit market, making it difficult for banks to sell debt raised to finance takeovers in general. Analysts have speculated that these factors may have contributed to Mr. Musk buyer regrets spending $ 44 billion on social media company,

In recent weeks, Mr. Musk has threatened to keep the Twitter deal “on hold” over the number of his fake accounts. Last month, he tweeted that “the deal can’t go ahead” unless Twitter shows “proof” that these accounts are less than 5 percent of its users, as the company repeatedly says. He made a similar remark at a conference in Miami, indicating that he could try to lay the groundwork for the deal to work again.

In doing so, Shri. Musk argues that Twitter has experienced “material adverse changes” that will significantly affect its business, which could lead it to break the deal. Legal experts, however, have questioned the merits of that argument, especially since Twitter has long stated that fake accounts represent about 5 percent of its users.

Mr. Musk’s letter on Monday, however, represents a new strategy. Instead of simply saying that the billionaire does not trust Twitter numbers, his lawyers said in the letter that the company, Mr. The information that Kasturi considers important to the deal – in this case, how it is responsible for the number of its bots.

The lawyers wrote that Mr. Musk “frequently” requested more information about how Twitter measures spam and fake accounts on its platform, and he “made it clear that he does not believe the company’s loose testing methods are sufficient so he should conduct his own analysis.”

He said Twitter’s co-operation was needed to secure debt financing pledged by banks to fund the deal. Mr. Morgan Stanley and other lenders. Musk’s takeover. Those commitments are governed by legal agreements, just like deals.

“What he’s really doing is trying to get out of the merger agreement,” said Ann Lipton, a professor of corporate governance at Tulane Law School. “If Twitter were really stoning information requests, and those information requests were necessary or justified to enable Musk to get its financing – which it is claiming in this letter – it would potentially be a violation that would allow Musk to walk away.”

Twitter, in turn, could argue that it did not have the information that Mr. Musk is demanding, or it’s not necessary to close the deal, she said.

The deal is expected to close by October. 24. If it doesn’t stop by then, both sides can go away. If the transaction is delayed by regulatory approvals at that time, Shri. Musk and Twitter will take another six months to shut it down. The deal includes a 1 billion breakup fee for both parties under certain conditions.

In many respects, the contract appears otherwise on track. Last week, Twitter announced that it had received regulatory approval from the Federal Trade Commission to proceed with its sale.

On the financing front, Shri. Musk revealed in a filing last month that he had increased his personal cash commitment to the deal by canceling a planned loan against Tesla shares. He also said he was in talks with other Twitter shareholders, including the company’s co-founder Jack Dorsey, about rolling out the company after privatizing his existing shares.

For Twitter, closing the deal exists. The company has struggled to deliver consistent financial results and grow its user base.

Twitter chief executive Parag Agarwal last month slashed the company’s discretionary spending and halted new hires. Since taking office in November, he has shaken up the company’s top ranks and plans further changes. He also asked employees to try to continue the course.

“I know we are going through a period of uncertainty,” he said at a recent company meeting. “We’re turning our attention back to our work.”

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