Musk accused the social media giant of making “misleading” statements about the number of fake accounts.
Twitter shares tumbled late Friday after Musk ended the deal.
Musk’s representatives said in a letter Friday that Twitter had made “misleading representations” on the number of spam bots on the social network, and that it was “in its contractual” order to provide information on how to assess how prevalent the bots are. obligations have not been complied with. Twitter as part of a regulatory filing.
Twitter said it would fight back in court,
“The Twitter Board is committed to closing the transaction on the agreed price and terms with Mr. Musk and plans to take legal action to enforce the merger agreement,” board chairman Brett Taylor said in a tweet. We are confident that we will win the Delaware Court of Chancery.”
The entire deal has been a frenzied and unconventional affair, largely driven by Twitter’s own social network. Musk, Tesla Inc.’s billionaire chief executive officer, went from being a prolific user only to revealing a significant stake in Twitter, and then began offering an unwanted takeover — without detailed financing plans — within a matter of weeks. . The agreement came together at breakneck speed as Musk skipped an opportunity to look beyond what’s publicly available to Twitter’s finances.
Shortly after deciding to own Twitter in April, Musk cooled off on the idea. Meanwhile, the price in the contract was looking better and better for Twitter, as the social network struggled to sell ads and began a hiring freeze. Its shares were also boosted by the broader market downturn.
Musk’s termination letter further dented Twitter stock and further worsened the company’s future after months of chaotic ups and downs, largely based on shifting public statements about Musk’s transactions . According to a person familiar with the situation, employees were told on Friday to refrain from posting about the deal on Twitter or Slack, as it is now considered a legal matter.
Tesla’s CEO previously threatened if the company could not show that less than 5% of its daily active users accounted for automated spam.
Previously, the world’s richest man expressed skepticism and even implied that he could get away with worrying about what he believed to be an abundance of fake accounts.
According to the Washington Post, despite being given access to internal data, Musk has been unable to determine the percentage of Twitter accounts that are not genuine.
Meanwhile, Twitter had said that it removes 1 million spam accounts Each day and refuted the claim, saying bots account for less than 5% of total users.
The letter pointed out several times that Musk and his team have asked Twitter for more information about the bots, and have not received enough to satisfy their questions.
The information “came with strings attached, use borders or other artificial formatting features,” making it “minimally useful.” Musk believes the amount of spam bots to be significantly higher than 5%, he said in the letter, without offering any evidence.
Musk also argued that Twitter had failed to conduct its normal business. The San Francisco-based company instituted a hiring freeze, fired senior leaders and saw other major departures.
“The company has not received parental consent for changes to the conduct of its business, including the specific changes listed above,” Musk said in the letter, calling it a “material breach” of the merger agreement.
Musk’s deal with Twitter included a provision that if it fell apart, the party that broke the deal would pay a $1 billion termination fee under certain circumstances. Legal experts have debated whether the conflict over spam bots is enough to allow Musk to walk away from the deal.
But Musk can’t get away with just paying a termination fee. The merger agreement includes a specific performance provision that allows Twitter to force Musk to complete the deal, according to the original filing. That could mean that, if the deal ends up in court, Twitter could secure an order obliging Musk to complete the merger instead of winning monetary compensation for any violations. The company has repeatedly said that it will follow that legal path.
Bob Swan, the former chief executive of Intel Corp., resigned from Musk’s deal negotiation team last month, surprising some who saw Hans as one of the seasoned “adults” in the working room together with Twitter’s chief financial officer Ned Segal. was seen as one. The deal, according to two people familiar with the process.
Swan, the former CEO and CFO of Intel, is now an operating partner at venture capital firm Andreessen Horowitz. The VC firm had agreed to help Musk finance his Twitter deal, and had previously pledged $400 million to Musk’s bid. Andreessen has also been helping with the integration work.
Swann and Musk did not respond to requests for comment.
Twitter shares fell nearly 7% on the news after closing Friday at $36.81 in New York. The stock is down 15% this year and hasn’t come close to reaching the $54.20 Musk offered in the deal.
The buyout, announced on April 25, could be one of the largest leveraged buyouts in history, if Twitter manages to get a judge to force Musk to go through with it. Musk’s initial offering included $25.5 billion in debt and margin-debt financing from lenders including Morgan Stanley, as well as an equity commitment of $21 billion from the 50-year-old billionaire. The financing evolved over the weeks that followed, with Musk bringing in other equity investors. And it has taken out $6.25 billion of margin debt against its Tesla shares, but it’s currently trying to change that by bringing in preferred equity investors.
(with inputs from Bloomberg)