Billionaire and entrepreneur Elon Musk has said he may withdraw his bid to buy Twitter. He accused the social media platform of withholding data on fake accounts.
This is not the first time Musk had suggested publicly his acquisition of Twitter may not happen. But the warning, delivered in a letter from Musk's lawyers to Twitter's chief legal officer, Vijaya Gadde, marked an escalation, a Reuters report reads. Musk had agreed to a deal to purchase Twitter in late April for $44 billion.
The Tesla and Space X CEO was unsatisfied with Twitter's claims that around 5 per cent of the accounts on the social media platform are fake accounts or are bots. Musk wanted to conduct his own analysis in this regard and sought data from the company for the same. Lawyers for the Tesla and SpaceX CEO made the threat in a letter to Twitter dated Monday that the social platform included in a filing with the Securities and Exchange Commission.
Musk has said that the company is under-counting the number of fake or spam bots and requested data to conduct his own investigation. Experts say whether Musk has the right to demand access to such data would be decided by the court.
The lawyers say in the letter that Twitter has offered only to provide details about the company's testing methods. But they contend that's tantamount to refusing Musk's data requests. Musk wants data so he can do his own verification of what he says are Twitter's lax methodologies.
US securities regulators have pressed Musk about the delay in reporting his Twitter stock buys. Experts say that Musk's questioning of Twitter bots might be a means to end the takeover process, or to pressure Twitter into lowering the price. Musk hasn't bought the micro-blogging platform yet, only signed a deal to buy it. He could walk away from it but might need to part with a $1 billion breakup fee.
Musk, on April 29 sold roughly $8.5 billion worth of shares in Tesla to help fund the purchase of Twitter. Musk, on May 13, said that his plan to buy Twitter is temporarily on hold. He said that he needs to pinpoint the number of spam and fake accounts on the social media platform. Shares of Twitter tumble, while shares of Tesla rebound sharply.
According to the letter by Tesla's lawyers, this is a clear material breach of Twitter's obligations under the merger agreement and Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement.
While Twitter remains unmoved at the initial price of $54.2 per share, the stock has fallen by over 25 per cent since early May. Tesla’s stock price has fallen dramatically by 35 per cent since April 4, the day Musk disclosed that he was Twitter’s largest stakeholder, cutting deeply into Musk's wealth --these could be reasons Musk is being mercurial regarding the Twitter deal.
If Musk chooses to walk away, Twitter could sue him to force him to complete the acquisition on agreed terms. And while Musk waived his rights to look into the company, the agreement allows Musk to get out of the deal if Twitter causes a “material adverse effect.”
The spam bot problem is something that has caught Musk's attention as his name is frequently mimicked by fake accounts conducting cryptocurrency scams.
--With PTI inputs
