Elon Musk threatens to end Twitter deal over lack of information about spam accounts

Elon Musk threatens to end his deal to buy Twitter a company

TWTR -1.79%

In a letter he accused the company of not complying with his request for data on the number of fake and spam accounts on the social media platform.

the master. Musk said Twitter refused to provide the necessary data to Mr. Mask to facilitate his assessment of the number of fake and spam accounts. In April, Twitter accepted Mr. Musk offered $44 billion to acquire the company and go private.

In a letter to Twitter’s chief legal officer, Vijaya Jade, Mr. Musk’s attorney, Mike Ringler, said Mr. Musk is entitled to obtain the requested data, in part so that he can facilitate the financing of the transaction.

the master. Musk has put together a group of 19 investors to back his deal. He also said in the filings that he is in talks with other existing shareholders on Twitter, including co-founder Jack Dorsey, to transfer their shares to the private company.

“In any case, Mr. Musk is not required to explain his rationale for the data request, nor to submit to the new terms the company has attempted to impose on his contractual right to the requested data.” Ringler Books. “At this point, Mr. Musk believes that Twitter is transparently refusing to comply with its obligations under the merger agreement.”

“This is a material breach of Twitter’s obligations under the merger agreement, and Mr. Musk retains all rights arising therefrom, including his right not to complete the transaction and his right to terminate the merger agreement.

A Twitter spokesperson said that the company “will continue to cooperate in the exchange of information with Mr. Musk to complete the transaction in accordance with the terms of the merger agreement.” “We intend to close the deal and enforce the merger agreement at the agreed price and terms,” ​​he added.

Twitter shares fell nearly 2% to around $39 by midday; All-cash deal at $54.20 per share.

the master. Musk’s latest letter is his clearest statement that he may try to abandon the deal, which could lead to what could be a protracted legal battle between the two sides. As part of the deal, the two parties agreed to pay each other $1 billion in breakup fees if they caused the deal to not take place for certain reasons. Twitter could also sue to compel Mr. Musk to go with the deal.

there are only specific scenarios under which mr. Musk will simply be able to pay a termination fee to walk away from the deal, including if regulators try to block the deal or debt financing fails. Twitter said last week that the window was closed for federal antitrust regulators to block the deal. and mr. Musk said he had financing lined up.

For years, Twitter has publicly released its own estimate of the number of daily active users that are fake or spam accounts, putting the percentage at less than 5% of monetized daily active users. the master. musk The number has been registered At least four times as much as 20% of Twitter accounts.

Elon Musk has established close ties with Beijing to build Tesla’s business in China. Now that it has bought Twitter and is focusing on free speech, The Wall Street Journal looks at how China is using the social media platform to promote its views, and why it raises such concern. Image caption: Sharon Shee

Twitter CEO Parag Agrawal on May 16 tweeted that The company shared the information With Mr. Musk on how to estimate spam numbers. the master. musk I responded with an expressive expression.

In his letter on Monday, Mr. Ringler confirmed that Mr. Ringler had received a response from Musk on Twitter on June 1, but said it did not satisfy Mr. Musk requests. “If Twitter is confident in its reported estimates of spam, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to independently evaluate these estimates,” the letter said.

As part of the deal, Mr. Musk waived the detailed due diligence that buyers typically perform on targets. in Reply to Tweet Monday, mr. Musk suggested to him that the due diligence waiver did not apply to any potential misrepresentations by Twitter.

Legal experts have offered various theories as to what might be driving Mr. Musk and his legal team.

“It sounds like they’re trying to get their due diligence done in an agreement that doesn’t have one,” said David Hoppe, a mergers and acquisitions, technology and media attorney at Gamma Law in San Francisco.

the master. Musk said that something has happened since he signed the deal that has raised new doubts about the estimates made by Twitter about the amount of spam and fake accounts on its platform.

“I’m sure Musk’s legal team would like there to be some change in the circumstances that would call into question the legitimacy of these numbers, but nothing has really changed,” El-Sayed said. Hope said. “There is no bomb.”

By linking the fake account case to Mr. Ben Maines, a professor at the University of South Carolina School of Law, said Musk’s ability to secure funding for the deal, his legal team could point to an exit exit they might try to pursue to extract their clients from the deal. “Obviously funding is needed to close the deal,” he said.

Eric Talley, a professor at Columbia Law School, said that while Mr. Musk has the right to request information, and Twitter may not be able to share it if doing so would infringe someone else’s legal rights or undermine the company’s competitive position.

the master. Musk offered to buy Twitter for $44 billion in April, and the company agreed to the deal that same month. In May, Tesla a company

The CEO said the deal is “temporarily on hold” due to his concerns about the company’s accounting for the number of fake accounts on its platform.

the master. Musk’s escalation of the robot case last month has raised suspicion among observers that he is using it as a negotiating tactic to lower the price amid market swings, or to exit a takeover deal. the master. Musk agreed not to belittle the company or the people working there under the deal, although he has since targeted both.

Fake accounts and spam are an industry-wide problem and can cause problems for advertisers and bad experiences for users. Accounts can be difficult to discover, and are usually managed by bots, which are computer programs that can automate posts and responses.

the master. Musk had unusually intense interactions with robots. As a regular tweeter with more than 95 million followers, the Tesla CEO likely has more exposure and experience with fake accounts and spam than most on social media platforms, researchers say. about 70% of mr. Musk’s Twitter followers are spam, fake, or inactive, as opposed to 41% of all other accounts with between 65 million and 120 million followers, according to an estimate last month from SparkToro LLC, the maker of audience research software.

write to Will Feuer at will.feuer@wsj.com and Sarah E. Needleman at sarah.needleman@wsj.com

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