Elon Musk told Twitter Inc (TWTR.N) on Monday that if it fails to supply him with data on spam and bogus accounts, he may walk away from his $44 billion offer to buy the social media giant.
This isn’t the first time Musk has hinted that his takeover of Twitter might not go through. However, the warning, which came in the form of a letter from Musk’s lawyers to Twitter’s chief legal officer, Vijaya Gadde, signified a significant step forward. It accused Twitter of “materially breaching” its contract commitments.
Musk’s warnings to rip up the transaction have coincided with a drop in numerous technology equities, including Tesla Inc (TSLA.O), which he leads, amid fears of an economic slowdown and higher interest rates in the face of soaring inflation.
On Monday, Twitter shares fell 1.5 percent to $39.57, a significant discount to the planned $52.20 purchase price, as investors wagered Musk will either persuade Twitter to accept a lower deal price or walk away from the deal.
Musk’s attorneys reaffirmed their request for facts on bot accounts in a letter to Twitter, saying he reserved all rights to cancel the transaction because the business had failed to meet its duties in a “clear material violation.”
Twitter responded by stating that it intended to enforce the deal’s completion on the agreed-upon conditions. “In order to complete the acquisition in accordance with the terms of the merger agreement, Twitter has and will continue to cooperatively exchange information with Musk,” the firm stated in a statement.
In mid-May, he announced that the Twitter transaction was “temporarily on hold,” stating that he will not forward with the offer unless the firm can prove that spam bots make up less than 5% of its overall users. He has stated that spam bots account for at least 20% of the user base.
According to independent analysts, 9 percent to 15% of the millions of Twitter profiles could be bots.
Musk wrote in his letter that he needs the information to perform his own analysis of Twitter users because he doesn’t trust the company’s “loose testing techniques.” Twitter has stated that it stands by its forecasts and that it is unable to reveal private information on how they are generated.
“He’s trying to back out of the Twitter transaction, and this is the first shot across the bow,” according to Wedbush analyst Dan Ives.
According to legal experts, the disclaimers Twitter employed in its spam account forecasts safeguard the firm from prospective litigation, whether from Musk over the transaction or shareholders over the integrity of the company’s regulatory disclosures.
Even if Twitter’s estimate is incorrect, Musk would have to establish that the San Francisco-based business was attempting to deceive with the intent to deceive – a high legal bar.
“It’s quite evident that Musk has buyer’s remorse, and he’s doing all he can to get a price reduction, and I believe he’ll succeed,” Dennis Dick, a proprietary trader at Bright Trading LLC, said.
