Elon Musk’s planned takeover of Twitter is in “serious threat”, according to a report, sending the company’s shares down 4% in after-hours trading on Wall Street.
Musk’s team has halted some talks about funding the $44 billion deal, according to a Washington Post report, citing three people familiar with the matter. The report says Musk concluded that Twitter’s numbers on spam accounts — a bone of contention in the deal — were unverifiable.
Twitter executives defended their anti-spam policy on Thursday, citing a team of specialists and automated processes that weed out 1 million fake accounts a day, but the report said access to the company’s public tweet data feed company has still not satisfied Musk. Twitter has always said that less than 5% of its daily active users are spam accounts – a figure Musk openly doubts.
The report says a “change of direction” from Musk is likely to happen soon, indicating that he will follow through on threats to try to pull out of the agreed deal.
However, legal experts said the world’s richest man, who is also the chief executive of Tesla, would be hard-pressed to end the takeover without a legal fight. Twitter’s purchase agreement 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 execute the agreement at the agreed price of $54.20 per share. The shares were priced at $37.10 after hours trading.
“Eventually, Twitter’s board will tire of the shenanigans and file a lawsuit for specific performances in Delaware,” said Brian Quinn, associate professor at Boston College Law School.
Twitter can also demand a $1 billion severance fee from Musk if he tries to renege on the deal. However, signs of a legal takedown strategy emerged last month when Musk’s attorneys sent a letter to Twitter warning that refusing to cooperate on the spam account issue was a “material breach” of law. ‘OK. Musk’s legal team argues that not providing information about the fake accounts violates a clause in the agreement, a promise to act in a certain way during the sales process, which would allow him to withdraw from the agreement.
Twitter then provided data for its 500 million daily tweets to reassure Musk, but the Washington Post report said he was not satisfied with the results of his team’s subsequent analysis.
Carl Tobias, Williams professor of law at the University of Richmond, said the reported “jeopardy” deal was the latest iteration of buyer’s remorse for Musk.
“The dust on the bots seemed like an excuse to avoid having to waive the $1 billion break fee. So for weeks, Musk seemed to say he wasn’t comfortable with the bots. agreement 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 complete the transaction in accordance with the terms of the merger agreement. We believe this agreement is in everyone’s best interests. shareholders. We intend to complete the transaction and implement the merger agreement at the agreed price and terms.”