Elon Musk has issued his sternest warning so far, saying he would walk away from his purchase of Twitter, accusing the social media company of breaching the merger agreement by not providing the data he has requested on spam and fake accounts. In a letter to the head of the legal, policy and trust department of Twitter, Vijaya Gadde, Elon Musk alleged that Twitter is “actively resisting and thwarting his information rights” as outlined by the deal.
“This is a clear material breach of Twitter’s obligations under the merger agreement and Mr Elon Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement,” an attorney representing Elon Musk wrote to the company. The richest man in the world has demanded that Twitter furnish information about its testing methodologies to support its claims that bots and fake accounts constitute less than 5% of the platform’s active user base, a figure the company has consistently stated for years in boilerplate public disclosures. Elon Musk has also called for doing his own independent assessment based on Twitter data.
On receiving the news, shares of Twitter fell 5% in early trading today in the US. Even before the latest development, the Twitter stock was trading well below Elon Musk’s takeover offer of $ 54.20 per share, likely indicating investor scepticism about the deal going through. Social media stocks have taken a hit in recent weeks amid broader market jitters.
Twitter’s CEO, Parag Agrawal, has stood by his company’s longtime spam metric. In a statement today, the company said: “Twitter has and will continue to cooperatively share information with Mr Elon Musk to consummate the transaction in accordance with the terms of the merger agreement.” The company said further that it intended to “close the transaction and enforce the merger agreement at the agreed price and terms”.
Elon Musk has alleged that the true number of spam accounts is likely much more, potentially as high as 90%. Elon Musk has previously said the acquisition “cannot move forward” until the company provides “proof” of its spam metric. Some Wall Street analysts say this pushback may be a case of buyer’s remorse and an effort to pressure Twitter into negotiating a lower price for the $ 44 billion deal.
Today’s letter speculated that Twitter might be “withholding the requested data due to concern for what Mr Elon Musk’s own analysis of that data will uncover”. The letter claimed Twitter had sought to restrict access to the information by interpreting the merger agreement narrowly, such that providing the information would fall outside the scope of Twitter’s contractual requirements. But the letter charged that even by Twitter’s narrowed definitions, it still has an obligation to furnish the information.
In another securities filing, Twitter had previously disclosed that Elon Musk had waived a due diligence clause in the deal that could have made it easier for him to back out of the agreement; without it, Elon Musk could face a tougher climb and the prospect of litigation.
In making the agreement to buy Twitter, Elon Musk has made spam bots on the platform a central issue. He has vowed to defeat them even if that means to “die trying”. But he has also described Twitter as being vital to “the future of civilization”.