Elon Musk threatens to abandon his bid to purchase Twitter for $44 billion. He accuses the company of refusing information about its spambot and fake accounts.
Lawyers representing the Tesla and SpaceX CEO threatened to send a tweet on Monday. The company then disclosed the threat in a filing with U.S. Securities and Exchange Commission.
Musk had repeatedly requested the information from lawyers since May 9, which was a month after he offered to buy the company. This was so that he could determine how many of 229 million accounts were fake.
Parag Agrawal, CEO of Twitter, stated that Twitter has always estimated that less than 5% are spam accounts. Musk, however, has denied that assertion, claiming in a May Tweet that 20% of its accounts are spam.
Twitter Inc. shares fell 1.5% Monday. This was likely due to Twitter shareholders who filed a lawsuit against Musk last month for inflating the stock’s price. Twitter shares have fallen more than 20% over the past month.
Twitter stated Monday in a statement that it had been sharing information with Musk “in compliance with the terms of the merge agreement” and that the deal is in the “best interest of all shareholders.”
It stated that it would close the transaction and enforce its terms at the agreed price.
In April, Musk bought Twitter for $54.20 per share. Many of Musk’s actions have since been controversial, including a dispute with Twitter CEO over fake accounts on Twitter. Experts are now questioning whether Musk wants to use his loud complaints for a lower price or walk away completely.
Musk’s lawyers stated in the letter that Twitter had only offered to give details about its testing methods. They claim that this is “substantial to refusing Mr. Musk’s data requests” and constitutes a “material violation” of the merger agreement, which gives Musk the right not to cancel the deal.
The letter states that “This is a material breach of Twitter’s obligations under the merger deal and Mr. Musk retains all rights therefrom including his right not consummate the transaction or his right to terminate it.”
Musk needs underlying data in order to verify his claims about Twitter’s lax methods.
Musk can opt out of the Twitter sale agreement if the deal has a “material adverse impact”. That is defined as any change that adversely affects Twitter’s financial or business conditions. Twitter has stated that it is proceeding with the deal since its inception, but has not scheduled a shareholder vote.
Musk claimed last month that he unilaterally put the deal on hold. Experts disagree. He could face a $1 million breakup fee if he leaves.
Musk’s latest move shows that he is looking for “a way out of this deal or something to get leverage for the renegotiation price,” according to Brian Quinn, a Boston College law professor. Quinn stated that it is unlikely to be accepted by the court because he has already waived his right to request more due diligence.
