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Less than three months after agreeing to buy Twitter for $44 billion, Elon Musk says he wants out. It’s no surprise — Musk has been expressing buyer’s remorse since shortly after he announced the deal.
Attorneys representing Musk sent a letter on Friday to Vijaya Gadde, Twitter’s chief legal officer, explaining why the Tesla CEO and the richest person in the world does not plan to proceed with the merger agreement.
Reiterating arguments Musk has made, the attorneys claimed that Twitter downplays the number of bots and spam accounts on the platform. Just weeks after Twitter accepted the unsolicited bid in late April, Musk began publicly expressing doubts about the company’s tally of fake and spam accounts.
“In short, Twitter has not provided information that Mr. Musk has requested for nearly two months notwithstanding his repeated, detailed clarifications intended to simplify Twitter’s identification, collection, and disclosure of the most relevant information sought in Mr. Musk’s original requests,” the lawyers wrote on Friday.
They added that inaccurate information provided by Twitter in SEC disclosures “may form an additional basis for terminating the Merger Agreement.”
Back in May, Musk said in a tweet, “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.”
Meanwhile, the company’s shares were plummeting over investor concerns that the deal would fall apart. A day before Musk said that the deal was on hold, Twitter’s market cap nosedived to $9 billion below Musk’s roughly $44 billion purchase price. It didn’t help that the broader market was tumbling, led by a collapse in tech stocks.
Twitter shares fell another 5% in after hours on Friday to $35.04 after dropping more than 5% in regular trading. They’re now 35% below the price of $54.20 that Musk agreed to pay.
Twitter isn’t prepared to let Musk walk away. Bret Taylor, the company’s chairman, said on Friday that Twitter will pursue the case in court.
“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,” Taylor wrote in a tweet. “We are confident we will prevail in the Delaware Court of Chancery.”
Some analysts viewed Musk’s public statements about Twitter spam accounts as a convenient a way to bail as the company’s value tanked.
Bernstein’s Toni Sacconaghi said on CNBC’s “Squawk Box” that he believed Musk was instigating a “negotiation tactic,” hoping that Twitter would eventually lower its sales price.
“The market has come down a lot,” Sacconaghi said at the time. “He’s probably using the guise of true active users as a negotiation ploy.”
Musk continued drawing attention to what he said was the major problem of undercounting spam accounts, indicating that he viewed the issue as an obstacle to completing the acquisition.
In mid-May, he again expressed to his audience of over 100 million Twitter followers his doubts about Twitter’s accounting of spam accounts. He alleged at the time that Twitter CEO Parag Agrawal “refused to show proof” that only less than 5% of accounts are fake or spam accounts.
“Yesterday, Twitter’s CEO publicly refused to show proof of <5%,” Musk tweeted. “This deal cannot move forward until he does.”
In June, Musk again publicly commented on the prevalence of fake and spam accounts on Twitter, saying at a Bloomberg event that “We’re still awaiting a resolution on that matter, and that is a very significant matter.”
It’s a far different tone than Musk was taking when he was aggressively pursuing a deal earlier this year. In April, he sent a letter to Taylor expressing his belief that the business “needs to be transformed as a private company” and that the messaging platform has the potential to “be the platform for free speech around the globe.”
“Twitter has extraordinary potential,” Musk said at the time. “I will unlock it.”