By BARBARA ORTHUTEY, TOM KRISHER and MATT O’BRIEN, Associated Press
Elon Musk announced on Friday that he would drop his $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 Tesla’s CEO to honor the deal.
The likely unraveling of the acquisition was just the latest twist in the saga between the world’s richest man and one of the most powerful social media platforms, and could herald a titanic legal battle.
Twitter could have demanded a breakup fee of $1 billion, which Musk agreed to pay under the circumstances. Instead, it appears poised to fight to complete the purchase, which the company’s board approved and Chief Executive Officer Parag Agrawal insisted he wants to go through.
In a letter to Twitter’s board, Musk’s lawyer Mike Ringler complained that his client had sought nearly two months of data to gauge the spread of “fake or spam” accounts on the social media platform.
“Twitter has been unable or unwilling to provide this information. At times, Twitter has ignored Mr. Musk’s requests, at times denied them for reasons that appear unwarranted, and at times has claimed compliance by providing Mr. Musk with incomplete or unusable information,” the letter said.
Musk also said the information was fundamental to Twitter’s business and financial performance and was necessary to complete the merger.
In response, Twitter chairman Brett Taylor tweeted that the board was “committed to closing the deal at the price and terms agreed upon” with Musk and “plans to take legal action to enforce the merger agreement.” We are confident that we will prevail in the Delaware Court of Chancery.”
Delaware’s trial court often hears business disputes between many corporations, including Twitter, that are incorporated there.
Former President Donald Trump expressed 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 after the January 6, 2021 riot at the US Capitol, back on the platform.
Much of the drama surrounding the deal has played out on Twitter, with Musk, who has more than 100 million followers, complaining that the company is failing to live up to its potential as a platform for free speech.
On Friday, Twitter shares fell 5% to $36.81, well below the $54.20 Musk agreed to pay. Meanwhile, Tesla shares rose 2.5% to $752.29. After the market closed and Musk’s letter was published, Twitter shares continued to fall, while Tesla climbed higher.
“This is a catastrophic scenario for Twitter and its board,” Wedbush analyst Dan Ives wrote in a note to investors. He predicted a lengthy legal battle for Twitter to either reinstate the deal or receive the $1 billion breakup fee.
On Thursday, Twitter tried to shed more light on how it counts spam accounts at a briefing with journalists and company executives. Twitter said it removes 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 reviewed “thousands of accounts” selected at random, using both public and private data such as IP addresses, phone numbers, location and the account’s behavior when active. to determine if the account is genuine.
Last month, Twitter offered Musk access to its “firehose” of raw data on hundreds of millions of daily tweets, according to multiple reports at the time, though neither the company nor Musk confirmed this.
One of the main reasons Musk gave for his interest in taking Twitter private was his belief that he could add value to the business by getting rid of its spambots — the same problem he now cites as a reason to end the deal.
“This whole process has been weird,” said Christopher Bussey, founder of research firm Bot Sentinel, which tracks fake Twitter accounts used for disinformation or harassment. “He knew about this problem. It’s strange that he would use bots, trolls and non-authentic accounts as a way to get out of the deal.
On the other hand, Boozy said, the letter from Musk’s legal team makes some valid criticisms of Twitter’s lack of transparency, including its apparent refusal to provide Musk with the same level of internal data it offers some of its big customers.
“It just seems like they’re hiding something,” said Busey, who also believes the number of fake or spam Twitter accounts is higher than the company has reported.
Musk’s lawyer also argued that Twitter breached the agreement when it fired two top executives and laid off a third of its talent recruitment team.
The sale agreement, he wrote, requires Twitter to “seek and obtain consent” if it deviates from conducting normal business. Twitter was required to “maintain substantially intact the material components of its current business organization,” the letter said.
Musk’s flirtation with buying Twitter appears to have started in late March. At the time, Twitter said it contacted board members — including co-founder Jack Dorsey — and told them it was buying back shares in the company and was interested in either joining the board, taking Twitter private or creating a competitor.
Then, on April 4, he disclosed in a regulatory filing that he had become the largest shareholder in the company after acquiring a 9 percent stake worth about $3 billion.
Twitter initially offered Musk a seat on its board. But six days later, Agrawal tweeted that Musk would not be joining the board after all. His bid to buy the company came together quickly after that.
When Musk agreed to buy Twitter for $54.20 a share, he inserted a reference to “420” marijuana into his price. He sold about $8.5 billion worth of shares in Tesla to help finance the purchase, then stepped up commitments of more than $7 billion from a diverse group of investors, including Silicon Valley heavyweights like Oracle co-founder Larry Ellison .
On Twitter, Musk’s proposal was met with confusion and falling morale, especially after Musk publicly criticized one of Twitter’s top lawyers involved in content moderation decisions.
Groups that have opposed the takeover from the start — including those advocating for women, minorities and LGBTQ people — welcomed Friday’s news.
“Despite what Musk may claim, this deal is not going down because of Twitter bots or spam accounts. This deal is failing because of Elon Musk’s erratic behavior, embrace of extremists and bad business decisions,” said Angelo Carusone, president of Media Matters, a left-leaning nonprofit that has been critical of Musk’s bid for Twitter.
Musk, he said, “has made it clear that he will roll back Twitter’s community standards and safety guidelines, turning the platform into a fever swamp of dangerous conspiracy theories, partisan shenanigans and white radicalization.”
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