Elon Musk has threatened to quit his $44 billion buyout of Twitter because the social media company will not reveal information about phony accounts.
The billionaire said that the company was ‘resisting and undermining’ his entitlement to information about spam pages on the platform.
In new SEC papers today, he slammed its top legal officer Vijaya Gadde, saying he’reserves all rights’ to cancel the merger agreement.
Earlier in the debate, Twitter said it had given the essential information, but Musk disregarded it as statements on how they discover bot accounts.
The entrepreneur has already threatened to cancel his blockbuster contract, which was ‘temporarily paused’ last month as he investigated bogus accounts.
He said that spam bots could account for at least half of all Twitter users, which is more than ten times the company’s official estimate.
He also tweeted last month that he ‘cannot move forward’ with the purchase unless the needed data is supplied.
Meanwhile, Musk’s other enterprises, SpaceX and Tesla, have been hammered by his Twitter acquisition, with stocks dropping amid concerns that he will be unable to balance the workload.
Musk’s counsel contended in a letter to Twitter’s Chief Legal Officer, Vijaya Gadde, dated Monday, that the terms of the billionaire’s acquisition deal require the platform to deliver the required data, which he purportedly has repeatedly demanded since May 9.
He also challenged the company’s purported contention that it is only compelled to furnish information for the “limited purpose” of concluding the transaction.
‘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,” the letter stated.
‘Musk believes Twitter is transparently refusing to comply with its obligations under the merger agreement, which is causing further suspicion that the company is withholding the requested data due to concern for what Musk’s own analysis of that data will uncover.’
For years, Twitter has published its bot estimates to the US Securities and Exchange Commission, while also warning that its estimate may be too low.
According to Twitter, Musk indicated last month that he wanted to suspend the purchase transaction to check that fraudulent or spam accounts comprised less than 5% of the company’s 229 million users during the first quarter.
If Twitter’s reporting is correct, there are fewer than 11.4 million bogus accounts that are targeted for ads.
The billionaire stated that he and his staff intended to perform their own audit of 100 Twitter followers to determine how many are bots or spam accounts.
‘As Twitter’s prospective owner, Musk is clearly entitled to the requested data to enable him to prepare for transitioning Twitter’s business to his ownership and to facilitate his transaction financing. To do both, he must have a complete and accurate understanding of the very core of Twitter’s business model—its active user base,’ the letter stated.
‘In any event, Musk is not required to explain his rationale for requesting the data, nor submit to the new conditions the company has attempted to impose on his contractual right to the requested data.’
The bot issue also reflects Musk’s long-standing obsession, as one of Twitter’s most active celebrity users, whose name and picture are frequently imitated by bogus accounts advertising cryptocurrency schemes.
The billionaire appears to believe that such bots are an issue for the majority of other Twitter users, as well as advertisers that place advertising on the network based on the number of real people they anticipate to reach.
Some analysts believe Musk is seeking the spam data in order to negotiate a cheaper price for the purchase or to withdraw totally.
The Twitter selling agreement permits Musk to back out of the purchase if the company causes a “material detrimental effect.” That is defined as a change that has a negative impact on Twitter’s business or financial conditions.
Financial experts say Musk can’t put the deal on hold unilaterally, but that hasn’t prevented him from acting as if he can.
Musk might face a $1 billion breakup fee if he pulls away from the merger agreement.
Though Twitter’s board of directors agreed to the acquisition in April, it has yet to be approved by shareholders and is not likely to close for at least many months.