Elon Musk threatens to abandon Twitter’s $44 billion acquisition

Elon Musk threatened to walk away from his $44 billion takeover of Twitter, complaining that the social media company failed to provide enough information about spam and fake accounts.

Musk has repeatedly criticized Twitter’s claim that less than 5 percent of monetizing daily active users are bots, and last month warned that his acquisition “can’t move forward” unless the platform provides evidence.

In a letter to Twitter’s chief legal officer that was disclosed in a regulatory filing on Monday, Musk’s attorneys at Skadden, Arps, Slate, Meagher and Flom wrote that the Tesla chief believes the company “has refused to provide information that… [he] Over and over since May 9.”

But Twitter insists it will stick to Musk’s original merger agreement. “Twitter has reached out and will continue to collaboratively share information with Musk to complete the transaction in accordance with the terms of the merger agreement,” a Twitter spokesperson said. We believe this agreement is in the best interest of all shareholders. We intend to close the transaction and enforce the merger agreement at the agreed price and terms.”

Since Musk and Twitter announced the deal in April, shares in Tesla along with high-growth technology companies have fallen sharply. Observers indicated that Musk, due to the market turmoil, may try to find an excuse to lower the price of the deal or walk away from it completely.

Musk’s lawyers said Twitter was “actively resisting and cautioning his information rights (and corresponding company obligations) under the merger agreement” and that this “obvious material breach of Twitter’s obligations” would allow Musk to “terminate the merger agreement.”

The message puts forward the idea that financing the deal from Wall Street banks could be in jeopardy if Twitter did not provide the information requested. “As the potential owner of Twitter, Mr. Musk is clearly entitled to obtain the data required to enable him to prepare for the transfer of Twitter’s business into his ownership and facilitate the financing of his transactions,” Skadden wrote in his letter.

It is not easy for Musk to escape his obligation to close the deal. Funding failure may offer one avenue, although it still involves paying a $1 billion termination fee.

Such legal maneuvers to steer clear of transactions rarely succeed, but Musk may seek negotiating leverage to force Twitter into a settlement that would allow him to pay to escape the company’s purchase.

A senior Wall Street attorney who was not involved in the deal said: β€œIt’s hard to tell how funding sources need this information given that Twitter has been able to raise debt and equity so far, and they certainly don’t qualify for it under their letter of commitment. But it is a prophecy that comes true. themselves in that Elon’s claim to her would make the banks want her, etc. So they could actually collude to make a mess of it.”

Twitter shares were down 2 percent Monday at $39.28, well below Musk’s bid price of $54.20.

Last month, Twitter CEO Paraj Agrawal addressed concerns about fake Musk accounts in a long series, insisting that the company had shared with him an “overview” of its estimation process, but that it could not share private data that would be necessary to repeat the process. externally.

Skadden said in her letter Monday that any third parties reviewing the data would abide by a nondisclosure agreement and that Musk would not retain or use “competitive sensitive information” if the deal was not closed. “If Twitter is confident in its reported estimates of spam, Musk does not understand the company’s reluctance to allow Mr. Musk to independently assess these estimates,” the lawyers added.

Additional reporting by Hannah Murphy in San Francisco

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