Elon Musk gave notice Friday that he is seeking to terminate his acquisition of Twitter just three months after it was announced.
In documents filed with the Securities and Exchange Commission on Friday evening giving notification of the cancellation of the acquisition, which would have cost the Tesla and SpaceX CEO $44 billion, Musk accused Twitter of misrepresenting the number of spam bots on its platform.
“Although Twitter has not yet provided complete information to Mr. Musk that would enable him to do a complete and comprehensive review of spam and fake accounts on Twitter’s platform, he has been able to partially and preliminarily analyze the accuracy of Twitter’s disclosure regarding its mDAU,” the document reads, using an initialism referring to monetizable daily active users. “While this analysis remains ongoing, all indications suggest that several of Twitter’s public disclosures regarding its mDAUs are either false or materially misleading.”
TWITTER CEO REPORTEDLY ‘WILLING TO GO TO WAR’ TO MAKE MUSK ACQUISITION HAPPEN
Musk’s effort to back out of the deal is far from a sure thing. Twitter gave notice Friday that it will fight to have the purchase go through.
“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,” tweeted Twitter board Chairman Bret Taylor minutes after the filing went public. “We are confident we will prevail in the Delaware Court of Chancery.”
Musk claims that Twitter failed to respond to multiple requests for internal data and information about how it identifies and suspends fake accounts. Twitter gave Musk a “firehose” of data on June 8 to perform his analysis of the company’s spam bot counts. Musk’s team had concluded that it was unable to verify Twitter’s claims that they only had 5% spam bots on the platform, according to a Thursday report from the Washington Post.
“While Twitter has provided some information, that information has come with strings attached, use limitations or other artificial formatting features, which has rendered some of the information minimally useful to Mr. Musk and his advisors,” the SEC filing states. This information arrived via an application programming interface, or API, and was more limited than Musk’s team needed to complete its testing.
The company restated during a Thursday briefing that its spam counts were still under 5%, according to Reuters, an estimate it has maintained over the past two years of quarterly releases. The company also reiterated that it manually examines thousands of accounts at random and uses public and private data to calculate and report the results to shareholders.
Twitter CEO Parag Agrawal did not take Musk’s threats well and has allegedly come out fighting in front of Twitter staffers. “Parag wants to swing back more and is being more aggressive internally,” one former Twitter executive said. “It seems Twitter is willing to go to war to make this deal happen.”
Musk also alleged in his Friday SEC filing that Twitter’s decision to fire its revenue product lead and general manager of consumer, as well as the decision of three executives to resign from the company after Musk’s acquisition, was also a breach of contract.
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Musk’s withdrawal from the merger agreement may become expensive for the billionaire. Included in the preliminary acquisition contract is a $1 billion reverse termination fee, which he would have to pay in order to exit. It is also highly likely that Twitter will fight Musk in the courts to force him to pay the initially established rate of $54.20 a share.
