Wednesday, December 07, 2022

Musk drops deal to buy Twitter; The company says it will sue

Musk Twitter 49222

By Barbara Ortute, Tom Crischer and Matt O’Brien

Elon Musk announced Friday that he would drop his turbulent $44 billion offer to buy Twitter after the company failed to provide enough information about the number of fake accounts. Twitter immediately retaliated, saying it would sue the Tesla CEO to uphold the deal.

The reveal of the acquisition’s prospect was the latest twist in a saga between the world’s richest man and one of the most influential social media platforms, and it could portend a titular legal battle ahead.

Twitter could have pushed for the $1 billion breakup fee that Musk agreed to pay under these circumstances. Instead, it is ready to fight to complete the purchase, which has been approved by the company’s board and which CEO Parag Agarwal insists it wants to complete.

Musk’s lawyer, Mike Ringler, complained in a letter to Twitter’s board that his client had sought data for nearly two months to gauge the prevalence of “fake or spam” accounts on the social media platform.

“Twitter has failed or refused to provide this information. Sometimes Twitter ignored Mr. Musk’s requests, sometimes it rejected them for reasons that appeared to be inappropriate, and sometimes it claimed to have complied, giving Mr. Musk incomplete or unhelpful information. done,” the letter said.

Musk also said that the information is fundamental to Twitter’s business and financial performance, and is necessary for the merger to end.

In response, Twitter’s chairman of the board, Brett Taylor, tweeted that the board is committed to closing the transaction with Musk at the “agreed price and terms” and “further legal action to implement the merger agreement”. We are confident that we will win in the Delaware Court of Chancery.”

Trial courts in Delaware often handle business disputes between several corporations, including Twitter, which are incorporated there.

Much of the drama has been played on Twitter with Musk – who has more than 100 million followers – lamenting that the company has failed to live up to its potential as a platform for free speech.

On Friday, Twitter shares fell 5% to $36.81, far less than the $54.20 Musk offered to pay. Meanwhile, Tesla shares climbed 2.5% to $752.29. After the market closed and Musk’s letter was published, Twitter’s stock continued to decline while Tesla climbed up.

“This is a disaster scenario for Twitter and its board,” Wedbush analyst Dan Ives wrote in a note to investors. He predicted a lengthy court battle would be fought by Twitter to either restore the deal or receive a $1 billion breakup fee.

On Thursday, Twitter sought to shed more light on how spam accounts count in a briefing with journalists and company executives. Twitter said it deletes 1 million spam accounts every day. Accounts represent less than 5% of its active user base each quarter.

In order to calculate how many accounts are malicious spam, Twitter said it will “test thousands of accounts” randomly sampled using both public and private data such as IP addresses, phone numbers, locations and account behavior when active. reviews, to determine whether an account is genuine.

Last month, Twitter offered Musk access to a “fire hose” of raw data on his millions of daily tweets, according to multiple reports at the time, though neither the company nor Musk confirmed this.

One of the main reasons Musk gave for his interest in taking Twitter private was his belief that he could add value to the business by getting rid of its spam bots – the same problem he now cited as the reason for ending the deal. quoting in.

“This whole process has been bizarre,” said Christopher Boozy, founder of the research firm Bot Sentinel, which tracks fake Twitter accounts used for misinformation or harassment. “He knew about the problem. It is strange that he would use bots and trolls and unauthenticated accounts as a way to get out of the deal.”

On the other hand, Bouzy said, the letter from Musk’s legal team makes some legitimate criticism of Twitter’s lack of transparency, including its refusal to provide Musk with the same level of internal data that it provides to some of its larger customers. .

“It looks like they are hiding something,” said Bouzy, who also believes that the number of fake or spam Twitter accounts is higher than the company reported.

Musk’s lawyer also alleged that Twitter broke the deal when it fired two top managers and laid off a third of its talent-acquisition team.

The sales agreement, he wrote, requires Twitter to “see and obtain consent” if it deviates from doing normal business. The letter said Twitter was required to “adequately protect the physical components of its existing business organization”.

Musk’s flirtation with buying Twitter began in late March. That’s when Twitter said it had contacted members of its board — including co-founder Jack Dorsey — and told them it was buying shares of the company and looking to join the board, take Twitter private or start a competitor. are interested in.

Then, on April 4, he disclosed in a regulatory filing that he had become the company’s largest shareholder after acquiring a 9% stake for about $3 billion.

First, Twitter offered Musk a seat on its board. But six days later, Agarwal tweeted that Musk would finally not join the board. Their bid to buy the company came together shortly thereafter.

Musk had agreed to buy Twitter for $54.20 per share, including the “420” marijuana reference in its offer price. He sold about $8.5 billion worth of shares in Tesla to help with the purchase, then cemented his commitments by more than $7 billion from a diverse group of investors, including Silicon Valley heavy hitters such as Oracle co-founder Larry Ellison. were involved.

Inside Twitter, Musk’s proposal was met with confusion and falling morale, especially after Musk publicly criticized one of Twitter’s top lawyers involved in content-restraint decisions.

Groups opposed to the takeover from the outset — including advocates for women, minorities and LGBTQ people — backed Friday’s news.

“Despite what Musk may claim, this deal isn’t going to end because of Twitter bots or spam accounts. Elon Musk’s erratic behavior, embracing extremists, and bad business decisions are causing the deal to collapse.” Angelo Carusone, president of Media Matters, a left-wing non-profit watchdog group that criticizes Musk’s Twitter bid.

Musk, he said, “made it clear that he would withdraw Twitter’s community standards and security guidelines, turning the platform into a fever quagmire of dangerous conspiracy theories, partisan trickery and white supremacist bigotry.”

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