Elon Musk has announced that he will abandon his $44 billion offer to buy Twitter, citing the company’s failure to provide enough information about the number of fake accounts.
Twitter immediately fired back, saying it would sue the Tesla CEO to uphold the deal.
The likely unravelling of the acquisition was just the latest twist in a saga between reputedly the world’s wealthiest man and the influential social media platform.
Twitter could have pushed for a $1 billion breakup fee that Musk agreed to pay under these circumstances. Instead, it looks ready to fight to complete the purchase, which the company’s board has approved and CEO Parag Agrawal has insisted he wants to consummate.
In a letter to Twitter's board, Musk lawyer Mike Ringler complained that his client had for nearly two months sought data to judge the prevalence of ‘fake or spam’ accounts on the social media platform.
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The letter stated: “Twitter has failed or refused to provide this information. Sometimes Twitter has ignored Mr Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr Musk incomplete or unusable information.”
Musk also said the information is fundamental to Twitter’s business and financial performance, and is needed to finish the merger.
In response, Twitter chairman Bret Taylor tweeted that the board is ‘committed to closing the transaction on the price and terms agreed upon’ with Musk, and “‘plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.”
Former US president Donald Trump weighed in on his own social platform, Truth Social: “THE TWITTER DEAL IS DEAD, LONG LIVE THE ‘TRUTH’,” he declared.
Musk has promised that that he would allow Trump, who was banned from Twitter following the January 2021, riot at the US Capitol, back onto the platform.
On Friday, shares of Twitter fell 5% to $36.81, well below the $54.20 that Musk agreed to pay. Shares of Tesla, meanwhile, climbed 2.5% to $752.29. After the market closed and Musk's letter was published, Twitter's stock continued to decline while Tesla climbed higher.
"This is a disaster scenario for Twitter and its board,” Wedbush analyst Dan Ives wrote in a note to investors. He predicted a long court fight by Twitter to either restore the deal or get the $1 billion breakup fee.
Last week, in a briefing with journalists and company executives, Twitter sought to shed more light on how it counts spam accounts. Twitter said it removes 1 million spam accounts each day. The accounts represent well below 5% of its active user base each quarter.
Last month, Twitter offered Musk access to its ‘firehose' of raw data on hundreds of millions of daily tweets, according to some unconfirmed reports.
One of the chief reasons Musk gave for his interest in taking Twitter private was his belief he could add value to the business by getting rid of its spam bots — the same problem that he’s now citing as a reason to end the deal.
“This whole process has been bizarre,” said Christopher Bouzy, founder of research firm Bot Sentinel, which tracks fake Twitter accounts used for disinformation or harassment. “He knew about this problem. It’s odd that he would use bots and trolls and inauthentic accounts as a way of getting out of the deal.”
On the other hand, Bouzy said, the letter from Musk’s legal team makes some valid critiques of Twitter’s lack of transparency, including its apparent refusal to provide Musk with the same level of internal data it offers some of its big customers.
“It just seems as if they’re hiding something,” said Bouzy, who also believes the number of fake or spam Twitter accounts is higher than what the company has reported.
Musk's lawyer also alleged that Twitter broke the agreement when it fired two top managers and laid off a third of its talent-acquisition team.
The sale agreement, he wrote, required Twitter to “seek and obtain consent” if it deviated from conducting normal business. Twitter was required to “preserve substantially intact the material components of its current business organization”, the letter said.
Musk’s flirtation with buying Twitter appeared to begin in late March. That’s when Twitter said he contacted members of its board, including co-founder Jack Dorsey, and told them he was buying up shares of the company and was interested in either joining the board, taking Twitter private or starting a competitor.
On April 4, Musk revealed in a regulatory filing that he had become the company’s largest shareholder after acquiring a 9% stake worth about $3 billion.
Musk has sold roughly $8.5 billion worth of shares in Tesla to help fund the purchase, then strengthened his commitments of more than $7 billion from a diverse group of investors including Silicon Valley heavy hitters like Oracle co-founder Larry Ellison.
“Despite what Musk may claim, this deal isn’t ending because of Twitter bots or spam accounts. This deal is collapsing because of Elon Musk’s own erratic behaviour, embrace of extremists and bad business decisions,” said Angelo Carusone, president of Media Matters, a left-leaning non-profit watchdog group that’s been critical of Musk’s Twitter bid.
