Elon Musk is officially trying — and here, ‘trying’ is a very important word — to break his $44 billion purchase agreement with Twitter. In a July 8th letter to the SEC, his representatives wrote, “Mr. Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement,” and “appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement.”
As previously reported, Musk waived his rights to due diligence in his haste to consummate the Twitter deal, while also agreeing to pay a $1 billion penalty if he later backed out. He seems to have almost immediately regretted this, and very quickly began laying a legal groundwork to break the agreement without paying the fine.
He has been repeatedly demanding Twitter prove a longstanding claim: That less than 5% of its users are bots or spam accounts. In response, last month the social media platform gave him access to their private, so-called “fire hose” of data. Musk is now arguing that even this is insufficient to prove the estimate of 5%.
“While Twitter has provided some information, that information has come with strings attached, use limitations, or other artificial formatting features, which has rendered some of the information minimally useful to Mr. Musk and his advisors,” the letter reads.
In particular, Musk highlights five areas where he believes Twitter should be more forthcoming: “Twitter’s process for auditing the inclusion of spam and fake accounts in mDAU [monetizable daily active usage],” “Twitter’s process for identifying and suspending spam and fake accounts,” “Daily measures of mDAU for the past eight (8) quarters,” “Board materials related to Twitter’s mDAU calculations,” and, “Materials related to Twitter’s financial condition.”
Since the letter was filed, Bret Taylor, Chairman of the Board of Twitter, tweeted, “The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.”
Update — July 12th: Twitter has formally filed a lawsuit against Twitter, with the goal of forcing him to complete his $44 billion acquisition of the company. “Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests,” Twitter said in its suit. “Musk apparently believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.” Twitter is seeking a trial in September ahead of the deal’s October 24th deadline.
The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.
— Bret Taylor (@btaylor) July 8, 2022