Elon Musk says Twitter in ‘clear material breach’ of acquisition agreement
Elon Musk today accused Twitter Inc. of breaching the terms of the agreement he inked with the company in April to acquire it for $44 billion.
Musk purchased a 9.2% stake in Twitter earlier this year and later offered to buy the entire company for $43 billion. In late April, the company accepted Musk’s offer at an increased price of $44 billion. The all-cash transaction values Twitter at $54.20 per share.
In mid-May, Musk tweeted that the deal was on hold. The Tesla Inc. chief executive said the reason for the move was Twitter’s estimate about the number of fake and spam accounts on its platform. Twitter stated in its first-quarter earnings report that fake and spam accounts constitute less than 5% of its monetizable daily active users, while Musk has said that he believes that figure to be 20%.
In a letter to Twitter sent today, an attorney for Musk accused the company of breaching the terms of the acquisition agreement. Musk is said to have sought an evaluation of the social network’s user base to determine what percentage of accounts are bots. The letter accuses Twitter of refusing “to provide the information that Mr. Musk has repeatedly requested since May 9, 2022 to facilitate his evaluation of spam and fake accounts on the company’s platform.”
The letter also states that Musk could scrap the deal as a result of the development. “This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement,” Musk’s attorney wrote.
Twitter “will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement.” the company said in a statement today. “We intend to close the transaction and enforce the merger agreement at the agreed price and terms.”
When Musk put the acquisition on hold in May, financial analysts speculated that the move may have been an attempt to either scrap the deal or to negotiate a lower price. If Musk is seeking to nix the deal, it’s believed that the move may be motivated by concerns about the transaction’s potentially negative impact on Tesla’s share price. Tesla’s stock has declined more than 20% in recent weeks.
The terms of Musk’s acquisition agreement with Twitter specify a $1 billion termination fee to be paid in the event that the deal doesn’t go through. However, ending the deal could be more expensive in practice. It was reported last month that Twitter could potentially sue Musk for “billions in damages” if he cancels the deal.
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