The long-anticipated takeover of Twitter by Tesla CEO Elon Musk may be dead in the water. After significant disagreements regarding the number of fake accounts on the social media platform, lawyers for Musk sent a letter to Twitter claiming it has” made false and misleading representations” and “breached” multiple provisions included in the initial agreement.
Just Can’t Verify
In May, Liberty Nation reported, “Twitter estimated in a filing that false or spam accounts represented fewer than 5% of its total 229 million monetizable Daily Active Users (mDAUs) during the first quarter of 2022. The microblogging platform noted that the figure ‘could be higher than we have estimated.'”
In an SEC filing, the social media giant wrote that no more than 5% of its user base were “fake” accounts; Musk did his own analysis in which he claimed that this figure was far closer to 20%.
A letter from Musk’s legal team at the beginning of June noted that:
“This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement.
“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 to the claims that fake accounts were much higher than reported, Twitter CEO Parag Agrawal shot back, saying that any external review of the numbers would be difficult to perform because of the “critical need to use both public and private information.”
However, Musk’s legal representatives say that Agrawal has been distinctly unhelpful, writing, “Twitter has failed or refused to provide this information. 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.”
The letter further states, “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.”
To the Courts?
Bret Taylor, Twitter’s board of directors chairman, responded to the legal notice directly on the platform, writing:
“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.”
While the intent of the letter appears to mark an end to the $44 billion deal, it is still possible that this is yet another effort to try and make Twitter comply with Musk’s requests for transparency. If it comes to a trial, the company board will have to substantiate its claim that less than 5% of users are essentially fake accounts.