Elon Musk threatens to cancel $ 44 billion Twitter deal for “material breach”

Elon Musk has accused Twitter of committing a “material breach” of its $ 44 billion (£ 35 billion) deal to buy the company and has threatened to terminate the deal, in the clearest indication so far. that the richest man in the world is preparing to move away from taking care of it.

Musk’s lawyers have written on Twitter accusing him of refusing to provide enough information about the number of fake users on the service, as part of a slow-fire dispute over the number of spam and fake accounts they fill the platform.

In a letter to Twitter legal director Vijaya Gadde, lawyers representing the CEO of Tesla said they believed the company was “actively resisting and frustrating” its rights to access company data and information in by virtue of the agreement. The letter said that Twitter had not provided the information requested by Musk since May 9, and added that a formal response from the social media platform on June 1 was insufficient.

“Twitter’s latest offer to simply provide additional details about the company’s own test methodologies, whether through written materials or verbal explanations, is tantamount to rejecting Mr. Musk’s data requests,” the letter said. of the American law firm Skadden, Arps, Slate, Meagher & Flom. .

He said Twitter’s methods for testing fake accounts were “lax” and that Musk needed company data to conduct his own analysis, as well as to help him secure debt financing for the deal. . He added that the company’s refusal to cooperate indicated a concern over what Musk’s analysis could reveal.

The letter concluded with a warning that Musk reserved all his rights under the agreement, including his right to leave the agreement and “terminate it.”

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“This is a clear material breach of Twitter’s obligations under the Merger Agreement and Mr. Musk reserves all rights arising therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement, “the letter said.

Twitter, whose CEO has posted a Twitter thread explaining how spam accounts are measured and the difficulties of doing so through a third party, said he continued to cooperate with Musk. He said: “Twitter has shared and will continue to share information cooperatively with Mr. Musk to complete the transaction in accordance with the terms of the merger agreement … We intend to close the transaction and enforce the merger agreement at the agreed price and conditions “.

Musk’s letter, published Monday on the website of the US financial watchdog, follows a negotiating process by tweet conducted by the billionaire over the past few weeks. On May 17, he tweeted that the deal “cannot move forward” until the issue of spam and fake accounts has been resolved.

Fake or spam accounts, known as bot accounts, are automated and not managed by human users. They can use the response feature or direct messages to send ads or scams to users, or represent attempts to influence public discourse by tweeting political propaganda.

Twitter has consistently stated in its quarterly results since 2014 that it estimates that the problem with its spam account accounts for less than 5% of its users. However, since reaching the agreement in April, Musk has raised concerns that the number of fake accounts could be much higher. The platform currently has 229 million users.

The formal agreement between Musk and Twitter supporting the acquisition would allow Tesla’s boss to step away from the deal without paying a severance fee if there is a material breach, according to Brian Quinn, an associate professor at the School of Law. Boston College.

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However, it would be up to a court to declare whether there had really been an offense, and Quinn said Musk’s allegation of rape was weak. “This was the basis of all that initial talk about robots as a ‘materially adverse revelation.’

John Coffee, a law professor at Columbia University, said Musk was paying the price to try to rush the deal. He said he hoped Tesla’s boss would look for a lower price for the deal, though “Twitter won’t grant that much, given Musk’s unstable position.”

“If Musk had felt that this information about the percentage of robots was critical, he could have negotiated a representation or done due diligence. He did neither. He was in a hurry to close and now that market prices have reversed, he wants to slow down, “Coffee said.

Shares of Twitter had fallen 2.5 percent to $ 39.17 in the afternoon in New York. The Musk deal values ​​the company at $ 54.20 per share.

If Musk breaches the agreement by attempting to leave without a reason covered by the document, Twitter has the option of asking for a $ 1 billion termination fee or asking a court to require Musk to complete the deal. transaction at the agreed price.

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