Elon Musk, CEO of Tesla and Spacex, believes Twitter is in material breach of its merger agreement with him and has the right to terminate the deal. The social media giant is refusing to provide important information related to spam and fake accounts on its platform, Musk’s lawyers explained.
Elon Musk may terminate his $44 billion Twitter takeover offer
in alettersent to Twitter Inc. Monday, also filed with the U.S. Securities and Exchange Commission (SEC), Elon Musk’s lawyers wrote:
Twitter Inc. . has refused to provide information that Mr. Musk has repeatedly requested since May 9, 2022 to facilitate the evaluation of spam and fake accounts on its platform.
“Mr. Mask has made it clear that he does not believe the company’s lax testing methods are adequate and that he needs to conduct his own analysis,” Mask’s lawyer added.
The letter noted that Twitter is required under the merger agreement to provide the data requested by Mr. Mask. Moreover, Mr. Musk’s lawyers argued that the requested data was necessary to form a complete and accurate understanding of Twitter’s active user base, which is “the very core of Twitter’s business model.”
Tesla’s CEO suspects that Twitter’s refusal to comply with its merger agreement obligations means that “the company is withholding the requested data out of concern that it will be revealed by Musk’s own analysis of that data,” the lawyers detailed.
In addition, the Spacex boss said that Twitter “under the merger agreement … . actively resisting and interfering with his information rights,” the letter explains, adding.
This is a clear and material breach of Twitter’s obligations under the merger agreement, and Mr. Musk reserves all resulting rights, including the right not to consummate the transaction and to terminate the merger agreement.
According to Twitter’s April proxy statement, Musk rushed to make a $44 billion “best and final” offer without conducting any due diligence. The social media company said in its proxy statement that “Mr. Musk did not ask for a confidentiality agreement and did not ask for any non-public information about Twitter”; Twitter used this reason to deny Musk’s data request.
On Monday, a Twitter user explained that the social media giant can be held liable for omitting or misleading material facts. He clarified that waving due diligence does not mean that he must accept unauthorized disclosures, such as understating the number of spambots.
Musk agreed and tweeted.” Correct.”
Musk had been complaining about spambots on Twitter for quite some time. He called it Twitter’s “single most annoying problem,” and promised to fix the problem if he succeeded in taking over the platform. ‘If I succeed in taking over Twitter, I will defeat the spambots or die!’ he assured. Since his offer was accepted by Twitter, Musk has discussed ways to solve the problem of spambots on the platform, including using the meme cryptocurrency dogecoin.
However, he announced last month that his Twitter acquisition deal is now on hold, tweeting that ” The Twitter deal is on hold temporarily pending details supporting the calculation that spam/fake accounts actually represent less than 5% of users.” Musk believes that more than 20% of users are faking.
According to the merger agreement, Musk must pay Twitter a $1 billion fee if he terminates a $44 billion cash deal for the social media company. However, this changes if Twitter is in breach of the agreement.
Wedbush analyst Dan Ives believes Musk is considering terminating his contract with the social media company, noting that Twitter would counter the accusation, he tweeted Monday.
Our view; Musk is considering walking away from the deal.
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