Elon Musk Says He Can Legally Cancel Twitter Deal
Tesla and SpaceX founder Elon Musk started courting Twitter two months ago, but the relationship is already souring. The world’s richest man says in a new legal filing that Twitter has breached the acquisition agreement by refusing to provide data. That, Musk’s lawyers say, gives the billionaire justification to walk away from the deal. This is just the latest in a series of (unusually public) moves that casts doubt on Musk’s intentions.
The dispute boils down to the way Twitter quantifies bot accounts. The more fake accounts, the less valuable Twitter is as a web property, and Musk claims the company is undercounting bots. In its regulatory filings, Twitter estimates that five percent of profiles are fake, but it has admitted that it doesn’t know for sure. Musk has stated publicly that he believes the number could be as high as 20 percent, and his offer to buy the company for $44 billion is predicated on the five percent figure.
In the new SEC filing, Musk’s lawyers write that Twitter has materially breached the agreement by refusing to turn over data that would allow Musk to conduct an independent analysis. Although, it’s telling that Musk only started to make a stink about bot numbers several weeks after his bid was accepted. He waived due diligence on the deal, and Twitter accepted a relatively modest breakup fee of $1 billion if Musk decides to walk.
Some have pointed out that Musk’s opinion of Twitter declined in tandem with the value of Tesla’s stock. Musk plans to use his Tesla shares to secure the loans that will fund his takeover of the social media site. When he announced his plans, Tesla shares were worth almost $1,000, but they’ve fallen 30 percent since then.
Twitter too has seen its value slide, peaking when he announced his nine percent stake in the company, but it has now settled under $40 where it was before Musk came calling. That $44 billion offer, which works out to $54.20 per share, cannot be modified. At least, that’s Twitter’s take on things. It has previously made it clear Musk would not be allowed to change the purchase price, and it would go to court to compel him to comply if necessary.
Does Musk want Twitter anymore? Did he even want it in the first place? Usually, these multi-billion dollar deals are conducted in private, but that’s not how Musk does things. It will be interesting to see how the public bickering plays out.
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