Elon Musk announced Friday that he would drop his turbulent $44 billion offer to buy Twitter after the company failed to provide enough information about the number of fake accounts. Twitter immediately fired back, saying it would sue the Tesla CEO to keep the deal.
The reveal of an acquisition prospect was just the latest twist in the saga between the world’s richest man and one of the most influential social media platforms, and it could portend a titular legal battle ahead.
Twitter could have pushed for the $1 billion breakup fee that Musk agreed to pay under these circumstances. Instead, it is set to fight to complete the purchase, which has been approved by the company’s board and which CEO Parag Agarwal insists it wants to complete.
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Musk’s lawyer, Mike Ringler, complained in a letter to Twitter’s board that his client had sought data for nearly two months to gauge the prevalence of fake or spam accounts on the social media platform.
Twitter has failed or has refused to provide this information. Sometimes Twitter ignored Mr. Musk’s requests, sometimes it rejected them for reasons that seemed inappropriate, and sometimes it claimed to have complied, giving Mr. Musk incomplete or unhelpful information. Yes, it is stated in the letter.
Musk also said that the information is fundamental to Twitter’s business and financial performance, and is necessary for the merger to end.
In response, Twitter’s chairman of the board, Brett Taylor, tweeted that the board was committed to closing the transaction at the agreed price and terms “with Musk” and “plans to pursue legal action to enforce the merger agreement”. We are confident that we will win the Delaware Court of Chancery.
Trial courts in Delaware often handle business disputes between several corporations, including Twitter, which are incorporated there.
Much of the drama has played out on Twitter, with Musk, who has more than 100 million followers, lamenting that the company has failed to live up to its potential as a platform for free speech.
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On Friday, Twitter shares fell 5% to $36.81, far less than the $54.20 Musk offered to pay. Meanwhile, Tesla shares climbed 2.5% to $752.29.
“This is a disaster scenario for Twitter and its board, Wedbush analyst Dan Ives wrote in a note to investors. He predicted a lengthy court battle for Twitter to reinstate the deal or receive a $1 billion breakup fee.
From the start, it was always a head scratch for Musk to go after Twitter at a $44 billion price tag and never made much sense for the Street, now that it ends up in a twilight zone (for now). Ends with Twitter boards against the wall and many in the street scratching their heads as to what lies ahead.
On Thursday, Twitter sought to shed more light on how spam accounts are counted in a briefing with journalists and company executives. Twitter said it deletes 1 million spam accounts every day. Accounts represent less than 5% of its active user base each quarter.
To calculate how many accounts are malicious spam, Twitter said it randomly sampled thousands using public and private data such as IP addresses, phone numbers, geolocation and how the account behaved when it was active. Review accounts to determine if an account is genuine.
Last month, Twitter offered Musk access to a fire hose of raw data on his millions of daily tweets, according to multiple reports at the time, though neither the company nor Musk confirmed this.
One of the main reasons Musk gave for his interest in taking Twitter private was his belief that it could add value to the business by getting rid of its spam bots, the same problem now cited as a reason for ending the deal. Is.
The whole process has been bizarre, said Christopher Bouzy, founder of research firm Bot Sentinel, which tracks fake Twitter accounts used for misinformation or harassment. He knew about the problem. It’s weird that he would use bots and trolls and unauthenticated accounts as a way to get out of the deal.
On the other hand, Bouzy said, the letter from Musk’s legal team makes some legitimate criticism of Twitter’s lack of transparency, including its refusal to provide Musk with the same level of internal data he provides to some of his larger clients. does.
It sounds like they’re hiding something, said Bouzy, who also believes the number of fake or spammy Twitter accounts is higher than the company reports.
Musk’s attorney also alleged that Twitter breached the agreement when it fired its revenue product leader and general manager of consumers and fired a third of its talent-acquisition team.
The sale agreement, he wrote, requires Twitter to seek and obtain consent if it deviates from doing normal business. The letter states that Twitter needs to keep the physical components of its existing business organization largely intact.
Kasturi’s flirtation began with the purchase of Twitter in late March. When Twitter said it contacted members of its board, including co-founder Jack Dorsey, and told them he was buying shares of the company and was interested in joining the board, taking Twitter private or starting a competitor.
Then, on April 4, he disclosed in a regulatory filing that he had become the company’s largest shareholder after acquiring a 9% stake for about $3 billion.
First, Twitter offered Musk a seat on its board. But six days later, Agarwal tweeted that Musk would finally not join the board. Their bid to buy the company came together shortly thereafter.
Musk had agreed to buy Twitter for $54.20 per share, including 420 marijuana references in its offer price. He sold about $8.5 billion worth of shares in Tesla to help with the purchase, then cemented his commitments by more than $7 billion to a diverse group of investors, including Silicon Valley heavy hitters like Oracle co-founder Larry Ellison.
Inside Twitter, Musk’s offer was met with confusion and falling morale, especially after Musk publicly criticized one of Twitter’s top lawyers involved in content-restraint decisions.
As Twitter executives prepared to pursue the deal, the company instituted a hiring freeze, halted discretionary spending and fired two top managers. The San Francisco company is also laying off employees, most recently part of its talent acquisition team.
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