(Ad Age) – Elon Musk said he believes Twitter Inc. is violating its merger agreement by failing to meet his demands for information about spam and fake accounts, injecting another twist in a takeover saga marked by the billionaire’s serial outbursts. Afterwards, shares fell about 5% in New York.
Musk believes Twitter is “actively resisting” and “frustrating his information rights” by refusing to release the data. Last month, Musk said he would not go ahead with his $44 billion acquisition of Twitter unless the social media giant can show that bots they represent less than 5% of its users, as the company has stated in its public documents. Musk has estimated that fake accounts make up at least 20% of all users.
The stock plunge reinforced doubts that Musk will follow through on his $54.20 per share offer, further widening the gap between market expectations and the billionaire’s price. The stock has barely broken above $50 — and briefly — since Musk launched his purchase plan on April 14.
Twitter CEO Parag Agrawal has publicly argued with Musk about the bots. Agrawal said the company has human reviewers who review “thousands of accounts” to determine the prevalence of bots, but added that he could not share more details due to privacy concerns. “Unfortunately, we do not believe this specific estimate can be done externally, given the critical need to use both public and private information,” Agrawal said in May.
In a statement, Twitter said it “has and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement.” The company said it believes the deal is in the best interests of all shareholders and intends to “close the transaction and enforce the merger agreement at the agreed price and terms.”
In Monday’s presentation, Musk sharply disagreed with Twitter’s assessment.
“Twitter’s latest offer to simply provide additional details regarding the company’s own testing methodologies, either through written materials or verbal explanations, is tantamount to rejecting Mr. Musk’s requests for data,” according to the presentation, which was addressed to Twitter’s legal counsel, Vijaya Gadde. “Twitter’s effort to characterize it differently is simply an attempt to obscure and confuse the issue. Mr. Musk has made it clear that he does not believe the company’s testing methodologies are adequate, so he must conduct his own analysis.” “.
Musk believes the company’s reluctance to provide more information is a “clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all resulting rights, including not consummating the transaction and terminating the transaction.” merger agreement.
Twitter’s board has said it plans to enforce the terms of the merger, saying the transaction is “in the best interests” of all shareholders.
The acquisition proposal includes a breakup fee of $1 billion for each of the parties, but Musk cannot walk away just by paying the fee.
The merger agreement includes a specific performance clause that allows Twitter to force Musk to consummate the deal, according to the agreement filing. That could mean that, should the deal end up in court, Twitter could get an order forcing Musk to complete the merger rather than get monetary compensation for any violations of the merger.
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