Elon Musk is ready to end his takeover of Twitter, reiterating his claim that the social media industry is covering up the number of spam and fake bot accounts on the site, lawyers representing the Tesla CEO said Monday.
Musk offered to acquire Twitter for $54.20 per share in an all-cash deal worth more than $44 billion in April. Twitter’s board members resisted his bid to take the company private, but eventually agreed to the deal. Musk then sold $8.4 billion worth of his Tesla shares, securing another $7.14 billion from investors to try to raise the $21 billion he promised to face himself. Tesla’s stock price has fallen since this saga began, while Twitter’s shares have gained and then fallen.
Morgan Stanley, Bank of America, Barclays and others have pledged to lend the remaining $25.5 billion through debt financing. The takeover seemed imminent as rumors swirled about how Musk wanted to monetize Twitter and take it public again in a future IPO. But the tech billionaire got cold feet and started walking away from the deal last month, saying he could only move forward if Twitter proved fake accounts were less than 5% of all users – a statistic claimed by Twitter and Musk believes it to be higher.
Now Musk has taken the issue further. In a letter to Twitter’s chief legal officer, Vijaya Gadde, his lawyers said their client was prepared to back out of the deal entirely over the disagreement over the fake accounts. During early negotiations, Musk agreed to pay Twitter a $1 billion severance fee if he backed out of the takeover, depending on the circumstances; that last letter could be an attempt to avoid paying that fee, seek a lower price for the business, or just end it all.
“Mr. Musk believes the company is actively resisting and frustrating his rights to information (and the company’s corresponding obligations) under the merger agreement,” said the missive, disclosed and released by the SEC.
“This is a clear breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all resulting rights, including his right not to complete the transaction and his right to terminate the transaction. merger agreement.”
Meanwhile… Texas anti-Big-Tech Attorney General Ken Paxton announced Monday that he is investigating Twitter to see if the website violated the US Deceptive Marketing Practices Act by misleading people about the number of bots on the social network.
According to a statement from Paxton’s office, “Twitter has come under intense scrutiny in recent weeks for claiming in its financial regulatory filings that less than 5% of all users are bots, when they may made up to a 20% or more difference could significantly affect the cost to consumers and businesses in Texas who transact with Twitter.”
Twitter CEO Parag Agrawal previously replied to Musk’s concerns about bot accounts, and insisted that internal research methods estimated that less than 5% of all users were fake. He said it was difficult to find an exact figure, since not all spam accounts were bots. Twitter reported [PDF] its average monthly international daily active users were 189.4 million in its latest Q1 2022 financial results, up 18.1% from the same quarter a year earlier.
Musk, however, thinks these numbers are wrong. He estimates that there are more bot accounts than Twitter estimates. Attempts to get more data from Twitter were unsuccessful, Musk’s lawyers said. “Twitter has, in fact, refused to provide information Mr. Musk has repeatedly requested since May 9, 2022 to facilitate his assessment of spam and fake accounts on the company’s platform,” the letter said.
“Twitter’s latest offer to simply provide additional details regarding the company’s own testing methodologies, whether through written documents or verbal explanations, is tantamount to denying Mr. Musk’s requests for data. Twitter’s effort to characterize it otherwise is just an attempt to obscure and confuse the issue. Mr. Musk has made it clear that he doesn’t believe the company’s lax testing methodologies are adequate. , so he had to conduct his own analysis.The data he requested is needed to do so.
A Twitter spokesperson, however, hit back at the claims and said the company was still pushing to complete the deal, in a statement to The register.
“Twitter has and will continue to cooperatively share information with Mr. Musk to complete the transaction in accordance with the terms of the merger agreement. We believe this agreement is in the best interest of all shareholders. We intend to complete the transaction and implement the merger agreement at the agreed-upon price and terms,” the rep told us. ®