Musk repeats threat to end $46.5bn Twitter deal – with lawyers, not just tweets
Right as Texas AG sticks his oar in
Elon Musk is prepared to terminate his takeover of Twitter, reiterating his claim that the social media biz is covering up the number of spam and fake bot accounts on the site, lawyers representing the Tesla CEO said on Monday.
Musk offered to acquire Twitter for $54.20 per share in an all-cash deal worth over $44 billion in April. Twitter's board members resisted his attempt to take the company private but eventually accepted the deal. Musk then sold $8.4 billion worth of his Tesla shares, secured another $7.14 billion from investors to try and collect the $21 billion he promised to front himself. Tesla's stock price has been falling since this saga began while Twitter shares gained and then tailed downward.
Morgan Stanley, Bank of America, Barclays, and others promised to loan the remaining $25.5 billion from via debt financing. The takeover appeared imminent as rumors swirled over how Musk wanted to make Twitter profitable and take it public again in a future IPO. But the tech billionaire got cold feet and started backing away from the deal last month, claiming it couldn't go forward unless Twitter proved fake accounts make up less than five per cent of all users – a stat Twitter claimed and Musk believes is higher.
Now, Musk has taken the issue further. In a letter addressed to Twitter's chief legal officer Vijaya Gadde, his lawyers stated their client is willing to pull out of the deal completely over this disagreement on fake accounts.
During early negotiations, Musk waived the need for any "business due diligence," and agreed to pay a $1 billion breakup fee to Twitter if he walked away from the takeover, depending on the circumstances. This latest letter could be an attempt to wriggle out paying that fee, angling for a lower price tag on the business, or just straight up ending it all.
"Mr Musk believes the company is actively resisting and thwarting his information rights (and the company's corresponding obligations) under the merger agreement," the missive, disclosed to and published by the SEC, stated.
"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."
Meanwhile... Anti-Big-Tech Texas Attorney General Ken Paxton (who incidentally denies charges of securities fraud charges against him) announced Monday he is probing Twitter to see if the website has broken the US state's Deceptive Trade Practices Act by misleading folks on the number of bots on the social network.
According to a statement from Paxton's office, "Twitter has received intense scrutiny in recent weeks over claiming in its financial regulatory filings that fewer than 5 percent of all users are bots, when they may in fact comprise as much as 20 percent or more. The difference could dramatically affect the cost to Texas consumers and businesses who transact with Twitter."
Twitter's CEO Parag Agrawal previously responded to Musk's concerns about bot accounts, and insisted internal research methods estimated less than five per cent of all users were fake. He said it was difficult to come up with an exact figure, considering not all spam accounts were bots. Twitter reported [PDF] its average international monthly daily active users was 189.4 million in its latest Q1 2022 financial results, up 18.1 per cent compared to the same quarter of the previous year.
Musk believes these numbers, however, are wrong. He reckons there are more bot accounts than Twitter is estimating. Attempts to obtain more data from Twitter have been fruitless, Musk's lawyers claimed. "Twitter has, in fact, refused to provide the information that Mr Musk has repeatedly requested since May 9, 2022 to facilitate his evaluation of spam and fake accounts on the company's platform," the letter said.
"Twitter's latest offer to simply provide additional details regarding the company's own testing methodologies, whether through written materials or verbal explanations, is tantamount to refusing Mr. Musk's data requests. Twitter's effort to characterize it otherwise is merely an attempt to obfuscate and confuse the issue. Mr. Musk has made it clear that he does not believe the company's lax testing methodologies are adequate so he must conduct his own analysis. The data he has requested is necessary to do so."
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A spokesperson from Twitter, however, hit back at these claims and said the company is still pushing to close the deal, in a statement to The Register.
"Twitter has and will continue to cooperatively share information with Mr Musk to consummate the transaction in accordance with the terms of the merger agreement. We believe this agreement 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," the representative told us. ®