Elon Musk announced on Friday that he would drop his tumultuous $44 billion bid to buy Twitter after the company failed to provide enough information about the number of fake accounts. Twitter immediately hit back, saying it would sue the Tesla CEO to enforce the deal.
The likely outcome of the acquisition was just the latest twist in a saga between the world’s richest man and one of the most influential social media platforms, and it could portend a titanic legal battle at come.
Twitter could have claimed a $1 billion severance fee that Musk agreed to pay under these circumstances. Instead, he appears set to fight to complete the purchase, which the company’s board has approved and CEO Parag Agrawal has insisted he wants to complete.
In a letter to Twitter’s board, Musk’s attorney, Mike Ringler, complained that his client spent nearly two months researching data to judge the prevalence of “fake or spam” accounts on Twitter. the social media platform.
“Twitter failed or refused to provide this information. Sometimes Twitter ignored Mr. Musk’s requests, sometimes it rejected them for reasons that seem unwarranted, and sometimes it pretended to comply while giving Mr. Musk incomplete or unusable information,” the letter reads.
Musk also said the information is fundamental to Twitter’s business and financial performance and is needed to complete the merger.
In response, Twitter Chairman Bret Taylor tweeted that the board is “committed to completing the transaction on the price and terms agreed to” with Musk and “plans to take legal action in justice to enforce the merger agreement”. We are confident that we will prevail in the Delaware Court of Chancery. »
The Delaware District Court frequently deals with business disputes between the many companies, including Twitter, incorporated there.
Former President Donald Trump has weighed in on his own social platform, Truth Social: “THE TWITTER DEAL IS DEAD, LONG LIVE THE ‘TRUTH'”. Musk said in May that he would allow Trump, who was banned from Twitter following the Jan. 6, 2021 riot at the U.S. Capitol, to return to the platform.
Much of the drama surrounding the deal has been played out on Twitter, with Musk – who has over 100 million followers – lamenting that the company hasn’t lived up to its potential as a platform for the freedom of expression.
Twitter shares fell 5% to $36.81 on Friday, well below the $54.20 Musk agreed to pay. Shares of Tesla, meanwhile, climbed 2.5% to $752.29. After the market closed and Musk’s letter was released, Twitter shares continued to slide as Tesla climbed higher.
“This is a doomsday scenario for Twitter and its board,” Wedbush analyst Dan Ives wrote in a note to investors. He predicted a lengthy legal battle by Twitter to either reinstate the deal or win the billion-dollar breach fee.
On Thursday, Twitter sought to shed some light on how it counts spam accounts during a briefing with journalists and business executives. Twitter said it deletes 1 million spam accounts every day. The accounts represent well under 5% of its active user base each quarter.
To calculate how many accounts are malicious spam, Twitter said it examines “thousands of accounts” randomly sampled, using both public and private data such as IP addresses, phone numbers, location and behavior of the account when active, to determine if an account is real. .
Last month, Twitter offered Musk access to its “fire hose” of raw data on hundreds of millions of daily tweets, according to multiple reports at the time, although neither the company nor Musk did. have confirmed.
One of the main reasons Musk gave for his interest in making Twitter private was his belief that he could add value to the business by getting rid of his spam bots – the same problem he now cites as the reason. to terminate the agreement.
“This whole process has been weird,” said Christopher Bouzy, founder of research firm Bot Sentinel, which tracks fake Twitter accounts used for misinformation or harassment. “He was aware of this problem. It’s strange that he uses bots, trolls and inauthentic accounts to get himself out of business.
On the other hand, Bouzy said, the letter from Musk’s legal team makes valid criticisms of Twitter’s lack of transparency, including its apparent refusal to provide Musk with the same level of insider data it offers to some of its big customers.
“It just seems like they’re hiding something,” said Bouzy, who also believes the number of fake Twitter accounts or spam is higher than the company reported.
Musk’s attorney also alleged Twitter broke the deal by firing two senior executives and firing a third of its talent acquisition team.
The sale agreement, he wrote, required Twitter to “seek and obtain consent” if it deviated from the normal course of business. Twitter was required to “preserve the material components of its current business organization substantially intact,” the letter states.
Musk’s flirtation with buying Twitter appears to have begun in late March. That’s when Twitter said it contacted its board members – including co-founder Jack Dorsey – and told them he was buying stock in the company and that he was interested in joining the board, privatizing Twitter, or launching a competitor.
Then, on April 4, he disclosed in a regulatory filing that he had become the company’s largest shareholder after acquiring a 9% stake worth about $3 billion.
At first, Twitter offered Musk a seat on its board. But six days later, Agrawal tweeted that Musk would ultimately not join the board. His offer to buy the company materialized quickly thereafter.
When Musk agreed to buy Twitter for $54.20 per share, he inserted a “420” marijuana reference into its price. He sold about $8.5 billion worth of Tesla stock to help fund the purchase, then bolstered his commitments to more than $7 billion from a diverse group of investors, including heavyweights. Silicon Valley heavyweights like Oracle co-founder Larry Ellison.
Inside Twitter, Musk’s offer was met with confusion and low morale, especially after Musk publicly criticized one of Twitter’s top lawyers involved in content moderation decisions.
Groups opposed to the takeover from the start — including those advocating for women, minorities and LGBTQ people — cheered Friday’s news.
“Despite what Musk may claim, this deal is not ending because of Twitter bots or spam accounts. This deal is falling apart because of Elon Musk’s erratic behavior, embracing extremists and bad business decisions,” said Angelo Carusone, president of Media Matters, a left-leaning nonprofit watchdog group that criticized Musk’s Twitter offer.
Musk, he said, “has made it clear that he will overrule Twitter’s Community Standards and Safety Guidelines, which would turn the platform into a fever swamp of dangerous conspiracy theories, partisan bickering and radicalization of white supremacy”.