Why is Elon Musk pulling out of the $44 billion deal to buy Twitter?
The Tesla CEO is threatening to revoke his record-breaking offer if Twitter fails to give information about the number of bot accounts on the site.
Elon Musk is reportedly threatening to walk away from the deal to buy Twitter after the company refused to turn over full details regarding the number of ‘bot accounts’ on the social media site.
In a letter sent to Twitter, Musk’s lawyers claim that the Tesla and SpaceX CEO has repeatedly asked for the information so he could evaluate the number of fake accounts. However the information has not been shared and Musk appears set to pull out of the deal.
The letter was made public on Monday morning and shares of Twitter Inc. fell by more than 5% at the start of trading.
Elon Musk warns he may walk away from his $44 billion deal to acquire Twitter if the social media network fails to provide data on spam and fake accounts, the billionaire said in a letter to the company https://t.co/SyekQevm9h $TWTR pic.twitter.com/lPwLonIx8f
— Reuters (@Reuters) June 6, 2022
Twitter accused of a “clear material breach” of the terms of contract
In May Musk reached an agreement with Twitter to purchase a controlling share of the social networking site for around $44 billion. The price, $54.20 per share, was at a 38% premium on the company’s share price at that time and was the largest deal to take a company private ever.
However last month Musk wrote on Twitter that he would not be completing the purchase until the company had provided him with information pertaining to fake accounts on the site. Exact specifics has not been made public but it is thought that he wanted to be given non-public information to get an accurate count.
The letter published on Monday claimed that Twitter had been unwilling to satisfy Musk’s request, which his lawyers claim is in breach of the information rights agreed under April’s merger agreement.
“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 says.
Musk says that Twitter isn’t giving him the info he needs on spam and is in breach of the merger agreement — because he needed to try to find some slender reason to back out of a merger he couldn’t afford.
— Tim O'Brien (@TimOBrien) June 6, 2022
Musk, who is one of the most followed people on Twitter, has long been fixated on the number of bots active on the social media site and it is proving a major barrier in this sale. Aside from his personal feelings towards the ‘fake’ accounts, the number of bots on the site could have repercussions for his commercial goals.
However experts have claimed that Musk could stand to lose out financially if he was to cut the sale at this stage. The deal agreed last month stipulates a $1 billion ‘breakup fee’ if Musk were to unilaterally cancel the deal. Musk’s lawyers claim that Twitter’s refusal to provide the information requested frees Musk from that penalty.