Elon Musk tries to back away from acquisition of Twitter9. July 2022
Elon Musk tries to back away from acquisition of Twitter
San Francisco, 7/9/2022
Late Friday, his lawyers sent Twitter and the U.S. Securities Exchange Commission (SEC) a formal notice to that effect.
As for the reasons for the termination, the letter states, “because Twitter violated several provisions of this Agreement, made apparently false and misleading representations relied upon by Mr. Musk in entering into the Merger Agreement, and is likely to suffer a Material Adverse Effect to the Company (as that term is defined in the Merger Agreement).”
Background: the point of contention is the number of spam or bot accounts on Twitter. Musk believes the platform is full of them, and Twitter has insisted his estimate is wrong. Twitter eventually offered to let him look at its data, but Musk wanted an independent audit.
To that end, the letter says, “Twitter has failed or refused to provide this information. Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has refused them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information.”
As a result, Musk has accused Twitter of violating the terms by not providing certain data about the spam accounts. Twitter later stated that it would provide access to its “Firehose” data stream of all public tweets, but claims that its bots account for less than 5% of its daily active users.
However, experts say this data only includes public tweets and not account-specific data that would show which accounts are run by real people and which are run by bots. Accordingly, Musk’s team concluded that Twitter’s data on spam accounts is “unverifiable.”
Earlier in the day, it was revealed that Twitter laid off 30% of its talent acquisition team, including recruiters, as part of a restructuring. The layoffs affect fewer than 100 employees, the company said. In May, Twitter said it had imposed a hiring freeze, except for critical positions, and that it would review and withdraw some extended offers.
Elon Musk said in response that he was also withdrawing his offer because Twitter had laid off high-level executives and a third of its talent acquisition team, violating Twitter’s commitment to substantially maintain the essential components of its current business organization.
Twitter Chairman Bret Taylor said Friday that the social media company will sue in a Delaware court to enforce the deal. The agreement included a clause that could force Musk to buy the company as long as he secured financing. Musk said in May that he had secured financing to close the deal.
Musk could also face a $1 billion fine if he exits. He is trying to avoid that penalty by accusing Twitter of “violating several provisions” of the agreement, according to a letter to the Securities and Exchange Commission announcing the termination of the offering.