Elon Musk Threatens to Drop Deal With Twitter

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Courtesy of Thomas Hawk (Flickr CC0)

On Monday, Elon Musk released a direct threat to drop the deal to purchase the social media platform Twitter. He accused the social media platform of breaking the agreement of merging. The claim comes after the company refused to give the data Musk has asked for about fake and spam accounts.

In a letter to Vijaya Gadde, the social media platforms head of trust, policy, and legal, Musk claimed that Twitter is thwarting and resisting his rights to information actively. The rights are outlined in the deal.

Musk’s attorney wrote a letter to the company stating this is an obvious material breach of the social media company’s obligations under the agreement of the merger that was made. Musk has ordered that Twitter give the information about the methodologies of testing. This is in order to support the claim that fake accounts and bots consist of less than five percent of the users on the platform. Twitter has used this number consistently for years in public disclosers. Also, Musk has called for doing an independent assessment of his own based on the social media platform’s data.

Musk’s Take Over is Higher Than Share Trading

On Monday, Twitter shares fell by five percent in early trading. Even prior to the more recent development, the social media platform stock was trading much lower than Musk’s takeover offer of $54.20 per share. It is likely that this points to skepticism from the investor in regard to the deal going through.

Parag Agrawal, the CEO of Twitter, has stood by the long-term spam metric in his company. A statement was made on Monday by the company stating the social media platform has and will remain cooperative and share information with Musk to continue with the transaction in obedience to the terms of the agreement for the merger.

Twitter also stated it plans to seal the transaction and impose the agreement at the agreed terms and price.

Musk has claimed that the actual number of accounts that are spam is likely much higher, possibly as much as 90%. He has said before that the acquisition cannot continue until Twitter gives proof of the spam metric.

Musk
Courtesy of Finnegan (Flickr CC0)

Some analysts with Wall Street have stated this pushback could be a form of remorse from Musk as well as an attempt to pressure the company to negotiate a lower price for the $44 billion deal. Since the beginning, there have been questions in regards to how Musk would finance the deal. Stocks for social media have taken a dive in the past weeks due to “broader market jitter.”

Lawyer’s Letter on Monday

The letter theorized that the social media platform could be withholding the data requested by Musk because of concern about what he will find in his own data analysis.

It also alleged Twitter had pursued to stop access to the data by understanding the agreement for the merger narrowly in a way that giving the information would land outside the area of the platform’s contract requirements. However, the letter said that even with Twitter’s pinpoint definitions, the company is still obligated to give the data to Musk.

In a different filing of securities, the platform disclosed previously that Musk had waived a clause for due diligence in the agreement that may have made it less tricky for him to back out of the deal. However, without the clause, he would have a harder time as well as the litigation prospect.

The Deal is Not Legally Airtight

While making the deal to purchase Twitter, Musk had made bots and spam accounts on the social media platform the main concern. He vowed to take them down or “die trying,” even while he was describing Twitter as being a vital part of “the future of civilization.”

The letter from Musk’s lawyer states he has a right to not close the deal of buying Twitter as well as the right to terminate the agreement for the merger.

Even though he has been posting about the deal being paused on Twitter for a moment, this is Musk’s first legal suggestion — done formally — that his deal to buy the platform is not legally airtight.

Written by Marrissa Kay
Edited by Sheena Robertson

Sources:

CNN Business: Elon Musk threatens to walk away from Twitter deal; by Brian Fung
Axios: Elon Musk asserts his right to not buy Twitter; by Felix Salmon
Reuters: Musk threatens to drop Twitter deal if fake-account data not provided; by Nivedita Balu

Featured and Top Image Courtesy of Thomas Hawk’s Flickr Page – Creative Commons License
Inline Image Courtesy of Finnegan’s Flickr Page – Creative Commons License

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