Elon Musk tells Twitter he’s going to kill the deal – TechCrunch

Elon Musk is officially trying to end his bid to buy Twitter. After strongly hinting that he no longer wants the company in tweets attacking Twitter because of its bot accounts and an ominous story in the Washington Post this week that reflects his thinking, Musk’s legal team is taking steps to terminate its $44 billion deal to buy Twitter.

“Mr. Musk is terminating the Merger Agreement because Twitter is in violation of multiple provisions of that Agreement, and appears to have made false and misleading representations upon which Mr. Musk has relied upon entering into the Merger Agreement, and is likely to suffer a material adverse impact on the company,” Musk’s lawyers wrote in a letter. To Vijaya Jade, Twitter’s chief legal officer.

Musk points to his baseless claims that Twitter is misleading investors and users about the number of fake accounts on its platform, which the company has long estimated to be less than 5%. Musk had no apparent concerns about the number of bots on Twitter before the deal was struck and has already stated that he plans to tackle the platform’s spam issue as the company’s new owner.

It’s widely assumed that Musk wants to get out because the markets plunged soon after the terms of the deal were agreed, taking a good chunk of his Tesla billions over the cliff, too. Shares of the electric car maker halved between April and late May and have not recovered since. By mid-May, Twitter’s stock price had fallen below $40 a share — a huge discount to the $54.20 a share that Musk approved in late April.

However, Musk’s argument is mainly that Twitter misrepresented the monetized numbers of daily active users, in doing so violating the terms of the deal:

Twitter is violating the merger agreement because the merger agreement appears to contain materially inaccurate representations. Specifically, in the merger agreement, Twitter clarified that no documents Twitter has filed with the US Securities and Exchange Commission since January 1, 2022, have included any “incorrect statement of material fact” (section 4.6(a)). Twitter has repeatedly made statements in such filings regarding the false or spam portion of the mDAU, including statements that: “We conducted an internal audit of a sample of accounts and estimate that the average of false or spammy accounts during the first quarter of 2022 represents less than 5% of our mDAU during the quarter,” and “after we determine that an account is spam, malicious automation, or fake, we stop counting it in our mDAU or other relevant metrics.” Mr. Musk relied on this representation in the merger agreement (and Twitter’s many public statements regarding false accounts and spam in publicly submitted SEC documents) when agreeing to enter into the merger agreement. the master. Musk has the right to request cancellation of the merger agreement if such material representations are determined to be false.

Musk’s legal team continues to claim that Twitter has not given him sufficient access to his data to conduct its own analysis, although it’s not clear how that analysis would differ from Twitter’s legacy methods. The letter also states that Twitter told Musk in an unreported phone call that the company had suspended accounts in its monetable daily active user numbers and cites this as evidence for his accusations that the company’s accounts are not above the board.

…Twitter has revealed that it stops counting fake users or spam in its mDAU when it determines that these users are fake looks like a liar. Alternatively, we understand, based on Twitter’s acknowledgment during a call with us on June 30, 2022, that Twitter includes accounts that have been suspended – and are thus known to be fake or spam – in a quarterly mDAU account even when it is aware that suspended accounts have been included in mDAU for the quarter.

Twitter CEO Brett Taylor responded to Musk’s message on Friday by redoubling the company’s intentions to complete the deal. Twitter’s Board of Directors is obligated to close the transaction at the price and terms agreed with Mr. Musk has written and plans to pursue legal action to enforce the merger agreement. Twitter CEO Parag Agrawal retweeted Taylor’s tweet.

Agrawal had previously dismissed Musk’s accusation that Twitter is reducing the number of fake accounts, describing Company methodology, which generalizes data for the entire platform based on random samples of accounts. “We do not believe that this specific estimate can be made externally, given the critical need to use both public and private information (which we cannot share),” Agrawal said. Tweet in May. “Externally, it is not even possible to know which accounts are counted as mDAU on any given day.”

It’s unclear that Musk’s unsupported criticism of Twitter’s bot numbers would be considered good enough reason to end the deal, especially given that Twitter is eager to get it done. For better or worse, we’ll hear more about this argument in the coming days as Musk and Twitter begin to dismantle their months-long, chaotic ordeal in court.

The story develops…

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