DETROIT — Elon Musk has threatened to walk away from his $44 billion bid to buy Twitter, accusing the company of refusing to give him information about its spam bot accounts.
Attorneys for the CEO of Tesla and SpaceX expressed the threat in a letter to Twitter on Monday. That letter was included in a Twitter filing with the Securities and Exchange Commission.
The letter states that Musk has repeatedly asked for information since May 9, about a month after his offer to buy the company, so he could assess how many of the company’s 229 million accounts are fake.
The shares of Twitter Inc. were down more than 4% on Monday, likely to anger Twitter shareholders who filed a lawsuit against Musk late last month for slashing the stock’s price. Shares of Twitter are down 23% in the past month.
A message was left early Monday asking for comment from Twitter.
The lawyers say in the letter that Twitter has only offered to provide details about the company’s testing methods. But they argue that this “is tantamount to denying Mr. Musk’s data requests.” Musk wants data so he can verify what he believes are Twitter’s lax methods.
Based on Twitter’s latest correspondence, the attorneys say Musk believes the company is opposing its information rights under the April merger agreement.
“This is a clear material breach of Twitter’s obligations under the merger agreement, and Mr. Musk reserves all rights arising from that place, including his right not to complete the transaction and his right to terminate the merger agreement,” the statement read. Letter.
Musk’s latest maneuver shows how he’s “looking for a way out of the deal or something that will leverage price renegotiation,” said Brian Quinn, a law professor at Boston College. But Quinn said it’s unlikely to hold up in court, as he’s already relinquished his ability to request more due diligence.
“I doubt he should be allowed to run away,” Quinn said. “At some point, Twitter’s board will get tired of this and file a lawsuit,” asking a judge to force Musk to stick to the deal.
Twitter CEO Parag Agrawal has said the company has consistently estimated that less than 5% of Twitter accounts are fake. Twitter has disclosed its estimates of bots to the US Securities and Exchange Commission for years but warned that the forecast could be too low.
The bot issue reflects a long-term fixation for Musk, one of Twitter’s most active celebrities, whose name and likeness are often impersonated by fake accounts promoting cryptocurrency scams. Musk seems to think that such bots are also a problem for most other Twitter users and advertisers who place ads on the platform based on how many real people they expect to reach.
Experts have said Musk cannot unilaterally cancel the deal, though that doesn’t stop him from pretending he can. If he runs away, he could end up with a $1 billion break.
The Twitter sale agreement allows Musk to pull out of the deal if there is a “material adverse effect” caused by the company. It defines that as a change that adversely affects Twitter’s business or financial conditions.
The letter signed by Musk attorney Mike Ringler that other attorneys copied points to an argument over a June 1 letter from Twitter in which the company said its disclosure obligations are limited to facilitating the sale’s closing. It says Twitter is required to provide data for any reasonable business purpose necessary to complete the deal.
Twitter must also cooperate with Musk’s efforts to secure financing for the deal, including providing information “reasonably requested” by Musk, the letter said.
The letter states that Musk is under no obligation to explain its reason for requesting data or to submit to “new terms that the company has attempted to impose on its contractual right to the requested data.”
It claims Musk is entitled to the data on Twitter’s core business model to prepare for the transition to his ownership.
“If Twitter is confident in its published spam estimates, Mr. Musk does not understand that the company is reluctant to allow Mr. Musk to independently evaluate these estimates,” the letter reads, adding that Musk agrees not to disclose the data. To create or save.
O’Brien reported from Providence, Rhode Island.