June 28, 2022

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Elon Musk threatens to end Twitter deal without spam accounts information

Elon Musk threatens to end Twitter deal without spam accounts information

Mr. Musk, who signed a deal to acquire Twitter in April, has threatened in recent weeks to put the deal on hold due to the number of its fake accounts. Last month, he tweeted:The deal can not go forwardUntil Twitter shows “evidence” that these accounts make up less than 5 percent of its users, Twitter has repeatedly said. He made similar statements at a conference in Miami, indicating that he might be trying to lay the groundwork for a reworking of the deal.

In doing so, Mr. Musk appears to be building a case to argue that Twitter has experienced a “material adverse change,” or a change that would significantly affect its business, potentially allowing him to break the deal. Legal experts have questioned the merits of this argument, particularly since Twitter has long revealed that fake accounts account for about 5 percent of its users. Mr. Musk’s message on Monday, however, represented a new strategy.

“What it’s actually doing is trying a much smarter way out of the merger agreement,” said Ann Lipton, professor of corporate governance at Tulane College of Law. “If Twitter is really blocking information requests, and those information requests are necessary or reasonable in order for Musk to get his funding — which he claims in this letter — that would likely be a breach that allows Musk to get away with it.”

She said Twitter, in turn, may argue that it does not have the information Mr. Musk is requesting, or that it is not necessary to close the deal.

“The merger agreement provides for information, with exceptions, but that doesn’t mean he can get whatever information he wants,” said Edward Rock, professor of corporate governance at New York University School of Law. “What I don’t know is the information he’s asking for.”

The deal is expected to close by October 24. And if it’s not closed by then, either side will be can walk away. If the transaction is delayed due to regulatory approvals at the time, Mr. Musk and Twitter will have another six months to close.

Last week, Twitter announced that Received regulatory approval from the Federal Trade Commission to move forward with the deal. Last month, Mr. Musk revealed in file That he raised his personal cash commitment to the deal, and canceled a planned loan against Tesla stock. Mr. Musk He said he is in talks with other Twitter contributors, Including the company’s co-founder and former CEO, Jack Dorsey, about transferring their existing shares to the company after they are taken private, rather than selling their stakes as part of the deal.

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