Elon Musk ends his Twitter deal

Elon Musk announced on Friday that he would drop his tumultuous US$44 billion bid to buy Twitter after the company failed to provide enough information about the number of fake accounts. Twitter immediately hit back, saying it would sue the Tesla CEO to enforce the deal.

The likely outcome of the acquisition was just the latest twist in a saga between the world’s richest man and one of the most influential social media platforms, and it could portend a titanic legal battle at come.

Twitter could have claimed a $1 billion severance fee that Musk agreed to pay under these circumstances. Instead, he appears set to fight to complete the purchase, which the company’s board has approved and CEO Parag Agrawal has insisted he wants to complete.

In a letter to Twitter’s board, Musk’s attorney, Mike Ringler, complained that his client spent nearly two months researching data to judge the prevalence of “fake or spam” accounts on Twitter. the social media platform.

“Twitter did not provide or refused to provide this information. Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that seem unwarranted, and sometimes it has pretended to comply while giving Mr. Musk incomplete or unusable information,” the letter said. .

Musk also said the information is fundamental to Twitter’s business and financial performance and is needed to complete the merger.

In response, Twitter Chairman Bret Taylor tweeted that the board is “committed to completing the transaction on the price and terms agreed to” with Musk and “plans to take legal action in justice to enforce the merger agreement. We are confident that we will prevail in the Delaware Court of Chancery. »

The Delaware District Court frequently deals with business disputes between the many companies, including Twitter, incorporated there.

Much of the drama unfolded on Twitter, with Musk – who has more than 100 million followers – lamenting that the company hasn’t lived up to its potential as a platform for free speech. .

On Friday, shares of Twitter fell 5% to $36.81, well below the $54.20 Musk had offered to pay. Shares of Tesla, meanwhile, climbed 2.5% to $752.29.

“This is a doomsday scenario for Twitter and its board,” Wedbush analyst Dan Ives wrote in a note to investors. He predicted a long legal battle from Twitter to reinstate the deal or get a $1 billion severance fee.

From the beginning it was always a headache to sue Twitter at a $44 billion price tag for Musk and never made much sense on the street, now it ends (for now) in a twilight zone ending with Twitter’s board against the wall and many on the street scratching their heads around what’s next. »

On Thursday, Twitter sought to shed some light on how it counts spam accounts during a briefing with journalists and business executives. Twitter said it deletes 1 million spam accounts every day. The accounts represent well under 5% of its active user base each quarter.

To calculate how many accounts are malicious spam, Twitter said it examines “thousands of accounts” randomly sampled, using public and private data such as IP addresses, phone numbers, geolocations and behavior. of the account when active, to determine if an account is real.

Last month, Twitter offered Musk access to its “firehose” of raw data on hundreds of millions of daily tweets, according to multiple reports at the time, although neither the company nor Musk did. have confirmed.

One of the main reasons Musk gave for his interest in making Twitter private was his belief that he could add value to the business by getting rid of its spam bots – the same problem he now cites as the reason. to terminate the agreement.

“This whole process has been weird,” said Christopher Bouzy, founder of research firm Bot Sentinel, which tracks fake Twitter accounts used for misinformation or harassment. “He was aware of this problem. It’s strange that he uses bots, trolls and inauthentic accounts to get himself out of business. »

On the other hand, Bouzy said, the letter from Musk’s legal team makes valid criticisms of Twitter’s lack of transparency, including its apparent refusal to provide Musk with the same level of insider data it offers to some of its big customers.

“It just seems like they’re hiding something,” said Bouzy, who also believes the number of fake Twitter accounts or spam is higher than the company has reported.

Musk’s attorney also alleged that Twitter breached the agreement by firing its chief product officer and chief consumer officer and firing a third of its talent acquisition team.

The sale agreement, he wrote, required Twitter to “seek and obtain consent” if it deviated from the normal course of business. Twitter was required to “preserve the material components of its current business organization substantially intact,” the letter states.

Musk’s flirtation with buying Twitter appears to have begun in late March. That’s when Twitter said it contacted its board members, including co-founder Jack Dorsey, and told them he was buying stock in the company and wanted to join. the board, privatize Twitter or launch a competitor.

Then, on April 4, he disclosed in a regulatory filing that he had become the company’s largest shareholder after acquiring a 9% stake worth about $3 billion.

At first, Twitter offered Musk a seat on its board. But six days later, Agrawal tweeted that Musk would ultimately not join the board. His offer to buy the company materialized quickly thereafter.

Musk had agreed to buy Twitter for $54.20 per share, inserting a “420” marijuana reference into his offer price. He sold about $8.5 billion worth of Tesla stock to help fund the purchase, then bolstered his commitments to more than $7 billion from a diverse group of investors, including heavyweights. from Silicon Valley like Oracle co-founder Larry Ellison.

Inside Twitter, Musk’s offer was met with confusion and low morale, especially after Musk publicly criticized one of Twitter’s top lawyers involved in content moderation decisions.

As Twitter executives prepared to move the deal forward, the company instituted a hiring freeze, halted discretionary spending and laid off two senior executives. The San Francisco company also laid off staff, most recently part of its talent acquisition team.

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