Elon Musk slammed Twitter as “actively resisting and thwarting his information rights (and the company’s corresponding obligations)” under the billionaire’s $44 billion deal to acquire the company, because the social network is refusing to provide data backing up its claims about fake and spam accounts.
Musk, who launched his takeover bid for Twitter in April, is threatening to spike the deal over the issue. Shares of Twitter fell more than 5% in early trading Monday on the latest disclosure to about $38/share, 30% below Musk’s original buyout offer of $54.20/share.
In May, Musk said his deal for Twitter was “temporarily on hold,” citing the need to conduct due diligence on Twitter’s claim that fake and spam accounts represent less than 5% of daily active users.
An SEC filing Monday included a June 6 letter from Musk’s lawyers to Twitter, saying that the company has “refused 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.”
“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,” the letter states.
The letter from Musk’s lawyers said Twitter is required “to provide data and information that Mr. Musk requests in connection with the consummation of the transaction… Mr. Musk is entitled to seek, and Twitter is obligated to provide, information and data for, inter alia, ‘any reasonable business purpose related to the consummation of the transaction.'”
“If Twitter is confident in its publicized spam estimates, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to independently evaluate those estimates,” the letter said.
Asked for comment, a Twitter rep provided this statement: “Twitter has and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement. We believe this agreement is in the best interest of all shareholders. We intend to close the transaction and enforce the merger agreement at the agreed price and terms.”
Without citing any evidence for the claim, Musk last month tweeted that Twitter’s active user base could represent “20% fake/spam accounts,” four times what the company claims, and it “could be *much* higher.”
Twitter CEO Parag Agrawal had responded to Musk’s questions on the issue, tweeting in part that “Unfortunately, we don’t believe that this specific estimation can be performed externally, given the critical need to use both public and private information (which we can’t share).”
Agrawal also noted that Twitter has disclosed its estimate that spam and fake accounts represent less than 5% of its active users for years — including in its IPO filing. Wall Street has viewed Musk’s sudden latching on to questioning the sub-5% spam/bot metric as an attempt to either nix the acquisition or to drive the deal price down.
Meanwhile, Musk has accused Twitter of displaying a left-wing bias and censoring conservative views. He has said he wants to make Twitter strictly adhere to “free speech” principles in moderating content and users on its platform, and has floated a range of other plans for the social platform including authenticating all users and charging companies a fee to use Twitter.