Elon Musk has warned that he could walk away from his $44 billion deal to acquire social media company Twitter if it fails to provide the data he is looking for on fake accounts.
It is noteworthy that this is not the first time that Musk has publicly suggested the possibility of canceling the deal. But the warning, delivered in a letter from Musk’s lawyers to Twitter’s chief legal officer, is an escalation. Twitter accused it of breaching the deal’s commitments.
Musk’s threats to cancel the deal coincided with the decline of many technology stocks, including the electric car maker he drives, Tesla – amid concerns about an economic slowdown and rising interest rates in the face of inflation.
Twitter shares fell 1.5% to $39.57, well below the agreed deal price of $52.20. Investors are betting on Musk either persuading Twitter to agree to a price cut of the deal or to withdraw.
In the letter to Twitter, Musk’s lawyers reiterated his request for details of the bot accounts. In the letter, Musk said he reserves all rights to terminate the acquisition because the company has clearly breached its obligations by not providing him with information.
The company responded that it planned to terminate the deal on the agreed terms. “Twitter has continued to engage collaboratively with Musk to complete the transaction in accordance with the terms of the merger agreement,” the company said in a statement. Musk said one of his priorities is to remove bot accounts from the platform.
Musk tweeted in mid-May that the deal was on hold, and said it would not proceed until the company showed evidence that bot accounts represented less than 5% of its total users. He explained that he believes bot accounts make up at least 20% of the user base.
Independent researchers have predicted that 9% to 15% of the millions of Twitter accounts may be bot accounts. In his letter , Musk said he needed the data to conduct his own analysis of Twitter users because he did not believe the company’s testing methodologies.
Twitter sticks to its filings with the US Finance Committee
The disclaimer used in expectations about bot accounts gives the company protection against potential lawsuits. Whether those lawsuits are from Musk about the deal or shareholders because of the accuracy of the company’s regulatory data.
Even if Twitter’s assessment was wrong, Musk would have to make clear that the company was seeking to mislead, which is legally difficult.
Musk can abandon the deal or renegotiate it even if the law is on the company’s side, due to the length of time that a lawsuit may take.
The company may consider it reasonable to agree to a lower price or receive compensation from Musk. Instead of trying to force him to complete the transaction in court.
As part of the deal, Musk is contractually obligated to pay a $1 billion withdrawal fee if he cannot complete the deal. According to Forbes, Musk’s fortune is $219 billion.
And antitrust regulators decided last week not to increase scrutiny of Elon Musk’s acquisition of Twitter. As a result, the matter is unlikely to falter due to regulatory reasons.
