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Friday, July 08, 2022

Elon Musk Twitter takeover deal in ‘serious jeopardy’ | Twitter | The Guardian

Elon Musk Twitter takeover deal in ‘serious jeopardy’

"Washington Post says Musk team has stopped certain funding discussions as Tesla CEO questions spam account figures

A phone screen displays the Twitter account of Elon Musk with a photo of him shown in the background
Legal experts say Elon Musk will struggle to terminate the takeover without a fight. Photograph: Olivier Douliery/AFP/Getty

The planned takeover of Twitter by Elon Musk is in “serious jeopardy”, according to a report, sending shares in the company 4% lower in after-hours trading on Wall Street.

Musk’s team has stopped certain discussions around funding for the $44bn deal, according to a report in the Washington Post, citing three people familiar with the matter. The report said Musk had concluded that Twitter’s figures on spam accounts – a bone of contention in the deal – were not verifiable.

Twitter executives defended their spam policy on Thursday, citing a specialist team and automated processes that weed out 1m fake accounts a day, but the report stated that access to the company’s feed of public tweet data had still failed to satisfy Musk. Twitter has stated consistently that fewer than 5% of its daily active users are spam accounts – a figure that Musk doubts openly.

The report said a “change in direction” from Musk was likely to come soon, indicating that he will follow through on threats to attempt to walk away from the agreed deal.

However, legal experts said the world’s richest man, who is also Tesla’s chief executive, would struggle to terminate the takeover without a legal fight. The agreement to buy Twitter contains clauses that include seeking “specific performance”, which means asking a court in Delaware – the US state that has jurisdiction over the deal – to order Musk to carry out the deal at the agreed price of $54.20 a share. Shares were priced at $37.10 in after-hours trading.

“Eventually, the Twitter board will tire of the shenanigans and will file a suit for specific performance in Delaware,” said Brian Quinn, an associate professor at Boston College law school.

Twitter can also demand a $1bn break fee from Musk if he attempts to renege on the agreement. However, signs of a legal strategy for backing out emerged last month when Musk’s lawyers sent a letter to Twitter warning that arefusal to cooperate over the spam account issue represented a “material breach” of the agreement. Musk’s legal team is arguing that failure to provide information about false accounts breaches a covenant in the agreement, a promise to act in a certain way during the sale process, which would allow him to walk away from the deal.

Twitter has subsequently provided data for its 500m daily tweets to reassure Musk but the Washington Post report indicates he has not been satisfied with the results of his team’s subsequent analysis.

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Carl Tobias, the Williams chair in law at the University of Richmond, said the deal being in reported “jeopardy” was the latest iteration of buyer’s remorse for Musk.

“The dustup over bots seemed to be pretextual to avoid having to forfeit the $1bn breakup fee. Thus, for weeks, Musk seemed to be saying that he was not comfortable with the deal and he now appears to be attempting to back out of the deal.”

A Twitter spokesperson 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. 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.”

Elon Musk Twitter takeover deal in ‘serious jeopardy’ | Twitter | The Guardian

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