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Elon Musk accused Twitter of being in “material breach” of its deal obligations by not providing the required information on fake accounts.
Musk has threatened to exit his Twitter deal if the company does not provide the demanded data on fake accounts. Elon Musk entered into an acquisition deal to buy Twitter for $44 billion. The news became the talk of the town, attracting criticism and commendations. However, the billionaire has constantly hinted that he may back off from the agreement. He called on the US SEC to investigate whether Twitter’s report on daily active users is correct. Musk believes Twitter is not coming out straight on its estimation of fake users.
Meanwhile, the social media service provider said only 5% of its entire users are spam accounts or bots. On the other hand, the Tesla CEO suspects that Twitter’s fake users are 5X more than it accounted for. In addition to hinting at suspending its acquisition princess, Musk also hinted at a possible renegotiation of his initial offer.
Musk Accuses Twitter of ‘Material Breach’ for Not Releasing Info about Fake Accounts
Most recently, Elon Musk accused Twitter of being in “material breach” of its deal obligations by not providing the required information on fake accounts. The businessman noted his stance in a letter delivered by his lawyers to Twitter’s Chief Legal Officer Vijaya Gadde. The letter emphasizes that Musk has the right to terminate the agreement based on the allegation. The letter explains that he needs the correct data for his personal analysis. According to Musk, he does not believe in Twitter’s “lax testing methodologies.”
“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.”
In response, the social media company said it intends to agree to the deal terms and enforce the deal’s completion. Twitter said it would continue to provide the necessary information, including details of fake accounts to Musk.
“Twitter has and will continue to cooperatively share information with Musk to consummate the transaction in accordance with the terms of the merger agreement.”
In May, the Tesla and SpaceX CEO said that the Twitter deal was “temporarily on hold” pending when the company releases the correct update on fake accounts. He added that the spam bots on Twitter constitute at least 20% of its user base. Independent researchers estimated that 9% to 15% of the millions of Twitter profiles are bots.
Musk’s Breakup Fee
Under the contract, the billionaire is obligated to pay a $1 billion breakup fee if he decides to back off from the agreement. As a result, analysts believe that Musk is seeking other ways to exit the deal without paying the breakup charge.
A proprietary trader at Bright Trading LLC., Dennis Dick, interpreted Musk’s actions as a tactic to buy Twitter at a lower price.
“It’s fairly obvious that Musk has buyer’s remorse and he is trying whatever to get a reduction in price, and I think he may succeed,” said he.