Musk threatens to ditch $44B deal to buy Twitter

Tesla CEO’s lawyers accuse social media giant of refusing to give info on bots

DETROIT — Elon Musk is threatening to walk away from his $44 billion bid to buy Twitter, accusing the company of refusing to give him information about its spam bot and fake accounts.

Lawyers for the Tesla and SpaceX CEO made the threat in a letter to Twitter dated Monday, and Twitter disclosed it in a filing with the U.S. Securities and Exchange Commission.

The letter says Musk has repeatedly asked for the information since May 9, about a month after his offer to buy the company, so he could evaluate how many of the company’s 229 million accounts are fake.

Twitter CEO Parag Agrawal has said that Twitter has consistently estimated that fewer than 5% of its accounts are fake.

But Musk has disputed that, contending in a May tweet that 20% or more are bogus.

Twitter shareholders filed a lawsuit against Musk late last month for deflating the price of the stock. Shares of Twitter are down 23% in the last month.

Musk agreed to buy Twitter for $54.20 a share in April. A number of Musk’s actions since, including a public spat with Twitter’s CEO about the fake accounts — on Twitter — has led some experts to question whether the billionaire wants to go through with the deal, or at least, lower his offer.

Twitter shares closed at $39.56 Monday, down 1.49%

Musk’s lawyers say in the letter that Twitter has offered only to provide details about the company’s testing methods. But they contend that’s “tantamount to refusing Mr. Musk’s data requests,” and constitutes a “material breach” of the merger agreement that gives Musk the right to scrap the deal if he chooses.

Musk wants underlying data to do his own verification of what he says are Twitter’s lax methodologies.

The Twitter sale agreement allows Musk to get out of the deal if there is a “material adverse effect” caused by the company. It defines that as a change that negatively affects Twitter’s business or financial conditions.

Last month Musk said that he unilaterally placed the deal on hold, which experts said he can’t do. If he walks away, he could be on the hook for a $1 billion breakup fee.

Musk’s maneuver shows how he is “looking for a way out of the deal or something that will get leverage for a renegotiation of the price,” said Brian Quinn, a law professor at Boston College. But Quinn said it’s unlikely to hold up in court since he waived his ability to ask for more due diligence.

“I doubt he would be allowed to walk away,” Quinn said. “At some point, the board of Twitter will tire of this and file a suit” asking a judge to force Musk to stick to the deal.

Twitter has disclosed its bot estimates to the SEC for years, while also cautioning that its estimate might be too low.

The bot problem is a longtime fixation for Musk, one of Twitter’s most active celebrity users, whose name and likeness are often mimicked by fake accounts promoting cryptocurrency scams.