Elon Musk is walking away from his $44 billion deal to buy Twitter, citing a failure of the Big Tech giant to provide information about the levels of spam or fake accounts on its platform.
In an SEC filing from attorneys representing Musk, they confirmed that the South African billionaire was terminating the merger agreement, because Twitter had made “false and misleading representations” when entering into the agreement.
The filing confirmed that Twitter has “failed or refused” to provide information to Musk necessary to “make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform.” The information is “fundamental to Twitter’s business and financial performance,” and therefore needed to complete the merger, the letter said.
“Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information,” it continued.
The information requested by Musk that was not provided by Twitter included:
- Information related to Twitter’s process for auditing the inclusion of spam and fake accounts.
- Information related to Twitter’s process for identifying and suspending spam and fake accounts.
- Daily measure of mDAU [monetisable daily active users] for the past eight quarters.
- Board materials related to Twitter’s mDAU calculations.
- Materials related to Twitter’s financial condition.
While it was reported in June that Twitter had provided access to its full “firehose” of data to Musk, which comprised not only all 500 million tweets per day, but also information about the accounts in question, this was not enough.
The SEC filing noted that access to the data was provided “with strings attached,” and that it was the same data provided to customers. Musk’s team alleged that Twitter “placed an artifical cap on the number of searches [their] experts can perform with this data,” which was only removed on July 6.
After the filing was published, Bret Taylor, the chairman of Twitter, announced that the board was “committed to closing the transaction” on the price and terms already agreed, and that they now plan to “pursue legal action to enforce the merger agreement.” The board had accepted the bid from Musk last month, despite the deal already having been put on pause.
The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.
— Bret Taylor (@btaylor) July 8, 2022
The merger agreement requires each party to pay the other $1 billion if they improperly back out from the acquisition. Twitter stock plummeted by 7% in extended trading after it was announced Musk had cancelled the deal.
