Elon Musk believes that Twitter has committed a material breach of the repurchase agreement and is therefore entitled to terminate it. The social media giant refused to provide key information regarding spam and fake accounts on its platform, Musk’s legal team explained.
In a letter sent to Twitter on Monday, which was also filed with the United States Securities and Exchange Commission (SEC), Elon Musk’s legal team wrote:
Twitter has … refused to provide information that Mr. Musk has repeatedly requested since May 9, 2022 to aid his assessment of spam and fake accounts on the company’s platform.
“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,” Mr. Musk’s attorney added.
The letter notes that Twitter is required to provide data requested by Mr. Musk under the takeover agreement. Musk’s legal team further argued that the requested data is necessary to get a full and accurate picture of Twitter’s active user base, which is “the very core of Twitter’s business model.”
Tesla CEO suspects Twitter’s refusal to comply with merger agreement obligations could mean that “the company is withholding requested data for fear of what Mr. Musk’s own analysis of that data will uncover“, detailed the lawyer.
In addition, the Spacex boss believes that Twitter “actively resisting and thwarting his rights to information…under the takeover agreement“, describes the letter, which adds:
This is a clear material breach of Twitter’s obligations under the buyout agreement and Mr. Musk reserves all rights under it, including his right not to complete the transaction and his right to terminate. the repurchase agreement.
According to Twitter’s April proxy statement, Mr. Musk rushed to give his “best and last” $44 billion offer without performing any due diligence. “Mr. Musk has not requested to enter into a confidentiality agreement and has not sought to obtain non-public information regarding Twitter from Twitter,” the social media company said in its power of attorney. Twitter used this reason to deny Musk’s data request.
On Monday, a Twitter user explained that the social media giant could be held liable for omitting material or misleading facts. He clarified that foregoing due diligence does not mean accepting fraudulent disclosure, such as an underestimated number of spam bots.
Musk nodded, tweeting: “Correct.”
Musk has been complaining about spambots on Twitter for some time. He called it “most annoying problem” on Twitter, promising to fix the problem if he succeeds in taking control of the platform. “If our offer on Twitter is successful, we will beat the spambots or die trying!” he asserted. Since his offer was accepted by Twitter, Musk has been discussing how to solve the spambot problem on the platform, including using the meme cryptocurrency dogecoin.
However, he announced last month that his deal to buy Twitter was now on hold, tweeting: “Twitter deal temporarily on hold pending details that the spam/fake accounts represent actually less than 5% of users.” Musk estimates that 20% or more of users are fake.
According to the takeover agreement, Musk will have to pay Twitter $1 billion if it terminates the $44 billion cash deal it has with the social media company. However, this changes if Twitter does not honor the agreement.
Wedbush analyst Dan Ives thinks Musk is looking to end the deal with the social media company. Noting that Twitter will fight this accusation, he tweeted on Monday:
Our take: Musk is looking to pull out of the deal.