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On Monday, Elon Musk made his most clear threat yet to walk away from his purchase of Twitter (TWTR), accusing the social media business of breaking the merger agreement by refusing to provide data on spam and bogus accounts that he had asked for.
In a letter to Vijaya Gadde, Musk accused Twitter of “actively fighting and undermining his information rights,” as stipulated in the arrangement.
In a strongly worded letter, Musk’s attorney describes the situation as a clear material breach of Twitter’s obligations under the merger agreement. Accordingly, Mr. Musk reserves all rights arising from it, including the right not to complete the transaction and the right to terminate the merger agreement.
Musk has asked that Twitter provide over information about its testing procedures to back up its claims that bots and fake accounts make for fewer than 5% of the platform’s active user base, a figure it has stated in boilerplate public reports for years. Musk has also suggested that he conduct his own independent analysis based on Twitter data.
Twitter’s stock dropped 5% in early trade on Monday. Even before the recent news, Twitter shares traded considerably below Musk’s $54.20 per share acquisition offer, signaling investor uncertainty about the deal’s success.
Parag Agrawal, Twitter’s CEO, has defended the company’s long-standing spam metric. In a statement released Monday, Twitter’s CEO reaffirmed the company’s commitment to sharing information cooperatively to complete the deal according to the merger agreement’s conditions.
“Closing the deal and enforcing the merger agreement at the agreed price and parameters,” the business added.
Musk claims that the true number of spam accounts is likely to be significantly higher, possibly as high as 90%. Therefore, according to Musk, the acquisition “cannot proceed forward” until the company offers “evidence” of its spam statistic.
Some Wall Street experts believe the resistance is a case of buyer’s remorse and an attempt by Musk to coerce Twitter into lowering its $44 billion purchase price. In addition, there have been concerns about Musk’s ability to fund the transaction from the beginning. Social media stocks have also taken a knock in recent weeks, Amid broader market worries.
According to the letter, Musk said Twitter is “withholding the requested data out of concern about what Mr. Musk’s own examination of that data will reveal.”
He also said Twitter attempted to limit access to the information by narrowly reading the merger agreement, claiming that making the information available would fall outside the scope of Twitter’s contractual obligations. However, the letter claimed that even if Twitter’s criteria are restricted, it is still obligated to provide the information.
Musk renounced a due diligence clause early in the negotiation. According to a separate securities filing by Twitter, a clause that may have made it simpler for him to get out; without it, Musk could face a steeper climb and the possibility of a lawsuit.
Musk has made spam bots on Twitter a primary issue in his agreement to buy Twitter. Yet, even as he has praised Twitter as critical to “the future of civilization,” he has promised to fight them or “die trying.”