DETROIT — Elon Musk is threatening to walk away from his $44 billion bid to buy Twitter, accusing the company of refusing to give him information about its spam bot and fake accounts.<\/p>\n
Lawyers for the Tesla and SpaceX CEO made the threat in a letter to Twitter dated Monday, and Twitter disclosed it in a filing with the U.S. Securities and Exchange Commission.<\/p>\n
The letter says Musk has repeatedly asked for the information since May 9, about a month after his offer to buy the company, so he could evaluate how many of the company\u2019s 229 million accounts are fake.<\/p>\n
Twitter CEO Parag Agrawal has said that Twitter has consistently estimated that fewer than 5% of its accounts are fake. But Musk has disputed that, contending in a May tweet that 20% or more are bogus.<\/p>\n
Shares of Twitter Inc. slid just under 3% Monday, likely incensing Twitter shareholders who filed a suit against Musk late last month for deflating the price of the stock. Shares of Twitter are down 23% in the last month.<\/p>\n
Twitter said in a statement Monday that it \u201chas and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement.\u201d<\/p>\n
\u201cWe intend to close the transaction and enforce the merger agreement at the agreed price and terms,\u201d it added.<\/p>\n
Musk agreed to buy Twitter for $54.20 a share back in April. A number of Musk\u2019s actions since, including a public spat with Twitter\u2019s CEO about the fake accounts — on Twitter \u2014 has led some experts to question whether the billionaire wants to go through with the deal, or least lower his offer.<\/p>\n
Musk\u2019s lawyers say in the letter that Twitter has offered only to provide details about the company\u2019s testing methods. But they contend that\u2019s \u201ctantamount to refusing Mr. Musk\u2019s data requests,\u201d and constitutes a \u201cmaterial breach\u201d of the merger agreement that gives Musk the right to scrap the deal if he chooses.<\/p>\n
\u201cThis is a clear material breach of Twitter\u2019s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement,\u201d the letter says.<\/p>\n
Musk wants underlying data to do his own verification of what he says are Twitter\u2019s lax methodologies.<\/p>\n
The Twitter sale agreement allows Musk to get out of the deal if there is a \u201cmaterial adverse effect\u201d caused by the company. It defines that as a change that negatively affects Twitter\u2019s business or financial conditions. Twitter has said all along that it\u2019s proceeding with the deal, although it hasn\u2019t scheduled a shareholder vote on it.<\/p>\n
Last month Musk said that he unilaterally placed the deal on hold, which experts said he can\u2019t do. If he walks away, he could be on the hook for a $1 billion breakup fee.<\/p>\n
Musk\u2019s latest maneuver shows how he is \u201clooking for a way out of the deal or something that will get leverage for a renegotiation of the price,\u201d said Brian Quinn, a law professor at Boston College. But Quinn said it\u2019s unlikely to hold up in court since he already waived his ability to ask for more due diligence.<\/p>\n
\u201cI doubt he would be allowed to walk away,\u201d Quinn said. \u201cAt some point, the board of Twitter will tire of this and file a suit\u201d asking a judge to force Musk to stick to the deal.<\/p>\n
Twitter has disclosed its bot estimates to the U.S. Securities and Exchange Commission for years, while also cautioning that its estimate might be too low.<\/p>\n
\u201cIf Twitter is confident in its publicized spam estimates, Mr. Musk does not understand the company\u2019s reluctance to allow Mr. Musk to independently evaluate those estimates,\u201d the Musk letter says, adding that he agrees not to disclose or keep the data.<\/p>\n
The bot problem is a longtime fixation for Musk, one of Twitter\u2019s most active celebrity users, whose name and likeness are often mimicked by fake accounts promoting cryptocurrency scams. Musk appears to think such bots are also a problem for most other Twitter users, as well as advertisers who take out ads on the platform based on how many real people they expect to reach.<\/p>\n
The letter signed by Musk attorney Mike Ringler that copied other lawyers, points to a spat over a June 1 letter from Twitter in which the company said it only has to give information related to closing the sale. It says Twitter is obligated to provide data for any reasonable business purpose needed to complete the deal.<\/p>\n
Twitter also has to cooperate with Musk\u2019s effort to get the financing for the deal, including providing information that\u2019s \u201creasonably requested\u201d by Musk, the letter states.<\/p>\n
The letter contends that Musk is not required to explain his rationale for requesting data or submit to \u201cnew conditions the company has attempted to impose\u201d on his right to get the numbers.<\/p>\n
It alleges that Musk is entitled to the data about the core of Twitter\u2019s business model so he can prepare the transition to his ownership.<\/p>\n