Elon Musk threatens to walk away from his deal on Twitter

Musk’s attorneys say in the letter that Twitter only offered to provide details about the company’s testing methods. But they argue that this “equates to denying Mr. Musk’s data requests” and constitutes a “material breach” of the merger agreement which gives Musk the right to rescind the deal if he chooses.

“This is a clear breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all resulting rights, including his right not to complete the transaction and his right to terminate the transaction. ‘merger agreement,’ the letter reads.

Twitter shares are down 23% in the past month.Credit:PA

Musk wants the underlying data to do its own verification of what he says are Twitter’s lax methodologies.

The Twitter sale agreement allows Musk to opt out of the deal if there is a “material adverse effect” caused by the company. He defines this as a change that negatively affects Twitter’s business or financial terms. Twitter has always said it is proceeding with the deal, although it did not expect a shareholder vote on it.

Last month, Musk said he had unilaterally suspended the deal, which experts said he could not do. If he leaves, he could be liable for $1 billion in severance pay.

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Musk’s latest maneuver shows how he’s “looking for a way out of the deal or something that will have leverage for a price renegotiation,” said Boston College law professor Brian Quinn. But Quinn said he was unlikely to resist in court since he had already waived his ability to seek further due diligence.

“I doubt he’s allowed to walk away,” Quinn said. “At some point, Twitter’s board will get tired of this and file a lawsuit” asking a judge to force Musk to stick to the deal.

Twitter has disclosed its bot estimates to the US Securities and Exchange Commission for years, while warning that its estimate may be too low.

“While Twitter is confident in its published spam estimates, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to independently assess these estimates,” Musk’s letter said, adding that he undertakes not to disclose or store the data.

The bot problem is a longtime fixation for Musk, one of Twitter’s most active celebrities, whose name and likeness is often impersonated by fake accounts promoting cryptocurrency scams. Musk seems to think these bots are also a problem for most other Twitter users, as well as advertisers who serve ads on the platform based on how many real people they expect to reach.

“I doubt he’s allowed to leave. At some point, Twitter’s board will get tired of it and file a lawsuit.”

Brian Quinn, law professor at Boston College

The letter signed by Musk’s attorney Mike Ringler, who has copied other attorneys, indicates a spat over a June 1 letter from Twitter in which the company said it had only to give information relating to the closing of the sale. It states that Twitter is obligated to provide data for any reasonable business purpose necessary to complete the transaction.

Twitter must also cooperate with Musk’s efforts to obtain funding for the deal, including providing information “reasonably requested” by Musk, the letter said.

The letter argues that Musk is not required to explain his rationale for requesting the data or submit to “new conditions the company attempted to impose” on his right to obtain the numbers.

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He alleges that Musk is entitled to data about Twitter’s core business model so he can prepare for the transition to his ownership.

PA

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