June 30, 2022

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Elon Musk threatens to end Twitter deal without spam accounts information

Elon Musk threatens to end Twitter deal without spam accounts information

in crisp, Six paragraphs message to Twitter On Monday, lawyers for Elon Musk, the world’s richest man, expressed their dismay.

Twitter was ‘resisting and failing’ Mr. Musk’s rights as he completed a A $44 billion deal to buy the social media serviceLawyers Books. They said the company was “rejecting requests for Mr. Musk’s data” to reveal the number of fake accounts on its platform. The lawyers said that represented a “clear material breach” of the deal, and gave Mr. Musk the right to terminate the agreement.

The letter, which was delivered to Twitter and filed with the Securities and Exchange CommissionAnd the He stepped up Mr. Musk’s campaign to end the blockbuster acquisition. After striking a deal to buy Twitter in April, Mr Musk, 50, has repeatedly said that. I suggested He may wish to cancel the purchase. Monday’s letter contained the most direct words yet about his desire to withdraw and his legal case for doing so.

It added another degree of uncertainty over whether Mr. Musk would complete the deal, even though he waived his rights to Twitter due diligence upon his purchase. The letter also raised the possibility of a contentious legal battle if one of the parties took the matter to court. If Mr. Musk follows this path, the terms of the deal give Twitter the right to sue him to force him to complete the acquisition, if the financing of his debt to the purchase remains the same.

The letter also caused some alarm. Mr. Musk, who leads electric car maker Tesla and rocket company SpaceX, is known for mercury and has Often wheeled wings and handlewhich makes his last maneuver completely unexpected.

“This is a move Twitter investors have been struggling with for weeks, the moment Elon Musk’s random musings are distilled into the tweets in an official letter to regulators,” wrote Susanna Streeter, senior investment and markets analyst at Hargreaves Lansdowne. “The takeover was always doomed to be a bumpy road.”

Twitter said the sale to Mr. Musk was still on track. “We intend to close the transaction and enforce the merger agreement at the agreed price and terms,” ​​a spokesperson said, adding that the company “will continue to share information collaboratively with Mr. Musk to complete the transaction.”

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A person familiar with the situation, who asked not to be identified because the discussions were confidential, said that behind the scenes, Twitter shared information with Mr. Musk for about a month without any interruption in communication.

Sean Edget, Twitter’s general counsel, also sent an email to employees Monday morning confirming the company’s commitment to closing the deal, according to a copy of the memo obtained by The New York Times.

Twitter’s stock fell 1.5 percent Monday to close at $39.56, well below the $54.20 share price that Musk agreed to pay the company.

Musk did not immediately respond to a request for comment.

Mr. Musk, who has been complaining about fake accounts and bots on Twitter for weeks, appears to have gained some traction on this issue with others. After Mr Musk’s message to Twitter became public on Monday, Ken Paxtonthe attorney general of Texas, said it was open an investigation the company “for potentially misleading Texans about the number of users of ‘bots,’” his office said in a statement.

Twitter declined to comment on Mr. Paxton’s investigation.

When Mr. Musk agreed to buy Twitter in April, he said he wanted to make the company private, allow more freedom of expression on the platform and improve the service’s features. But in the weeks that followed, the stock market plummeted due to inflation concerns, the war in Ukraine and supply chain challenges.

The economic downturn affected the shares of companies such as Tesla, which is the main source of Musk’s wealth. The turmoil has also rattled credit markets, which could make it difficult for banks to sell debt that would normally be raised to fund the acquisition. Analysts speculated that these factors gave Mr. Musk buyer remorse over spending $44 billion on the social media company.

In recent weeks, Mr. Musk has threatened to suspend the Twitter deal due to the number of its fake accounts. Last month, he tweeted:The deal can not go forwardUntil Twitter shows “evidence” that these accounts make up less than 5 percent of its users, the company has repeatedly said. He also made similar statements at a conference in Miami, indicating that he might be trying to lay the groundwork for a reworking of the deal.

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In doing so, Mr. Musk appeared to be building a case to argue that Twitter had experienced a “material adverse change” that would significantly affect its business, potentially allowing him to break the deal. However, legal experts have questioned the merits of this argument, particularly since Twitter has long revealed that fake accounts account for about 5 percent of its users.

Mr. Musk’s message on Monday, however, represented a new strategy. Rather than simply saying the billionaire doesn’t believe the Twitter numbers, his lawyers said in the letter that the company was in breach of its obligations by not giving Mr. Musk information he deemed important to the deal — in this case, how his bot count explains it.

The lawyers wrote that Mr. Musk had “repeatedly” requested more information about how Twitter measures spam and fake accounts on its platform and that he “has made it clear that he does not believe the company’s lax testing methodologies are sufficient so he should conduct his own analysis.”

They said Twitter’s cooperation is necessary to secure the debt financing that the banks committed to fund the deal. Morgan Stanley and other lenders committed 13 billion dollars into debt to help pay for Mr. Musk’s acquisition. These obligations are subject to the same legal contracts as the transaction.

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“What it’s actually doing is trying a much smarter way out of the merger agreement,” said Ann Lipton, professor of corporate governance at Tulane College of Law. “If Twitter is really blocking information requests, and those information requests are necessary or reasonable in order for Musk to get his funding — which he claims in this letter — that would likely be a breach that allows Musk to get away with it.”

She said Twitter, in turn, may argue that it does not have the information Mr. Musk is requesting, or that it is not necessary to close the deal.

The deal is expected to close by October 24. And if it’s not closed by then, either side will be can walk away. If the transaction is delayed due to regulatory approvals at the time, Mr. Musk and Twitter will have another six months to close. The deal includes a $1 billion breakup fee for both parties, under certain conditions.

In many respects, the agreement appears to be on the right track. Last week, Twitter announced that Received regulatory approval from the Federal Trade Commission to initiate their sale.

On the financing front, Mr. Musk revealed in file Last month, he raised his personal cash commitment to the deal, canceling a planned loan against Tesla stock. he is too He said he is in talks with other Twitter contributors, Including Jack Dorsey, the company’s co-founder, about transferring their existing shares to the company after it goes private.

For Twitter, completing the deal is existential. The company experienced difficulties in delivering consistent financial results and increasing the number of users.

Parag Agrawal, Twitter’s CEO, last month cut discretionary spending for the company and froze new hires. Where Received in NovemberHe has revolutionized the upper echelons of the company and has plans to make more changes. He also asked the staff to try to stay in the track.

“I know we are going through a period of uncertainty,” he said at a recent company meeting. “We are bringing our focus back to our work.”