- Oops!Something went wrong.Please try again later.
Elon Musk is threatening to terminate his deal to buy Twitter — even though he signed a contract saying he would — with his lawyer alleging that the social media company has not properly allowed Musk to evaluate the number of fake accounts on the platform.
In a letter to Twitter Chief Legal Officer Vijaya Gadde (filed with the Securities and Exchange Commission), Musk’s lawyer Mike Ringler claimed that Twitter has “refused to provide the information… to facilitate his evaluation of spam and fake accounts on the company’s platform.” While Twitter claimed in a public filing last month that less than five percent of its 229 million users are inauthentic, Musk has raised doubts about that number and used those doubts to suggest he might pull out of the deal.
More from Rolling Stone
Musk first publicly aired that alleged concern in a May 13 tweet where he claimed his deal to take over Twitter was “on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” This tweet came at a moment when the stock price of Twitter — and many other tech companies, including Musk’s Tesla — was in free fall, making the contract Musk signed in late April to acquire Twitter at $54.20 a share (for a total of $44 billion) look like a pretty bad deal for him.
In the month since, Twitter’s stock price has not rebounded (nor has Tesla’s, for that matter), and Musk has continued to accuse Twitter of not providing adequate details about the number of fake accounts on the platform or its methods for determining that number. According to Ringler’s letter, Musk was not pleased with the way Twitter characterized its practices in this regard in a June 1 letter, calling it “merely an attempt to obfuscate and confuse the issue.” Additionally, Ringler said Musk “does not believe the company’s lax testing methodologies are adequate so he must conduct his own analysis. The data he has requested is necessary to do so.”
In a statement shared with Rolling Stone, Twitter said, “Twitter has and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement. We believe this agreement is in the best interest of all shareholders. We intend to close the transaction and enforce the merger agreement at the agreed price and terms.”
Ringler went on to say that Musk’s request for this information “satisfies” the condition of the merger agreement that Twitter provide Musk with any information for “any reasonable business purpose related to the consummation of the transaction.” He continued: “At this point, Mr. 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 Mr. Musk’s own analysis of that data will uncover.”
Ringler signed off his letter with the most explicit threat yet that Musk may renege on the contract he signed, claiming Twitter’s actions constitute “a clear material breach of Twitter’s obligations under the merger agreement.” He continued, “Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement.”
Of course, it’s not that easy for Musk to call off a merger deal for which he has signed a legally binding contract. As has been previously reported, the merger agreement does have a $1 billion termination fee that Musk would have to pay if he walks away. But paying that fee wouldn’t necessarily preclude Twitter from also suing Musk if they believed, for instance, Musk balked at the deal not because of spam bots, but because he was allegedly no longer happy with the price he agreed to pay for Twitter before it’s stock tanked.
This story was updated 6/6/22 at 12:31 p.m. ET with a statement from Twitter.
Best of Rolling Stone