Twitter Shares Fall 5% After Musk Threatens To Cancel Deal Over Fake Accounts Issue

Twitter shares were down more than 5% during trading yesterday after Elon Musk threatened to terminate the proposed $44 billion Twitter takeover.

In a letter to Twitter yesterday, Elon Musk has reportedly accused the company of ¡°resisting and thwarting¡± his right to information about fake accounts on the platform. The Tesla CEO called this a ¡°clear material breach¡± of the terms of their merger agreement, as per a CNBC report.

¡°Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement,¡± the letter, signed by Skadden Arps attorney Mike Ringler, reportedly says.

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In the weeks following Twitter¡¯s acceptance of Elon Musk¡¯s $44 billion offer, the Tesla CEO has on numerous occasions vocally criticized Twitter during media interviews and on Twitter, where he has over 96 million followers (at the time of writing this report).

He announced last month that his $44 billion purchase of the company would not move forward until he had more information about the number of fake accounts on the service.

On May 17, the Tesla and SpaceX CEO suggested Twitter had included bad information in its financial filings. He wrote: ¡°My offer was based on Twitter¡¯s SEC filings being accurate. Yesterday, Twitter¡¯s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does¡±, as per the CNBC report.

He reportedly said his team would do a random sampling to calculate the number of fake accounts, but Twitter¡¯s CEO later explained that nonpublic information would be necessary to get an accurate count. Twitter executives told staff there¡¯s ¡°no such thing¡± as putting the deal on hold as Musk claimed, according to a report in Bloomberg.

Some analysts interpreted Musk¡¯s moves as a negotiation tactic for a lower price, as per CNBC.

What Twitter Said

¡°Twitter has and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement,¡± the company said later Monday in a statement. ¡°We believe this agreement is in the best interest of all shareholders. We intend to close the transaction and enforce the merger agreement at the agreed price and terms.¡±

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In Monday¡¯s letter, Elon Musk¡¯s lawyer wrote that the merger agreement requires Twitter to provide the data Musk requested and disputed the company¡¯s alleged claim that it is only required to provide information for the limited purpose of helping to close the transaction.

¡°To the contrary, Mr. Musk is entitled to seek, and Twitter is obligated to provide, information and data for, inter alia, ¡®any reasonable business purpose related to the consummation of the transaction,¡¯¡± the letter says, as per CNBC.

¡°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,¡± it continues.

According to the letter, Musk would agree to ensure anyone reviewing the data would be bound by a nondisclosure agreement and he would not use any ¡°competitively sensitive information¡± if the deal doesn¡¯t close.

Also Read: As Elon Musk Takes Over, Here's A Look At Major Hits & Misses From Twitter's 16-Year-Old Journey

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