Elon Musk says he can walk away from the Twitter deal over "material breach"

midian182

Posts: 8,030   +89
Staff member
What just happened? Elon Musk's $44 billion purchase of Twitter is looking even shakier after the world's richest person threatened to terminate the deal over a "material breach" of the company's obligations under the agreement. Once again, the issue relates to Twitter allegedly refusing to prove how many bots and fake accounts are on the platform.

Musk's lawyers made the claim in a letter to Twitter's chief legal officer, Vijaya Gadde, yesterday, alleging that Twitter is "actively resisting and thwarting" his information rights by refusing to provide information on the number of fake, spam, and bot accounts that have long been a problem on Twitter.

The letter, published on the SEC website, states that Musk made the information request on May 9 but the formal response Twitter sent on June 1 was insufficient. "Twitter's latest offer to simply provide additional details regarding the company's own testing methodologies, whether through written materials or verbal explanations, is tantamount to refusing Mr Musk's data requests," wrote law firm Skadden, Arps, Slate, Meagher & Flom.

On May 13, Musk said the Twitter buyout was temporarily on hold until he had evidence supporting a claim that false or spam accounts represented fewer than 5% of Twitter's monetizable daily active users in Q1. The Tesla boss did add, however, that he remained committed to the acquisition but later said the actual figure could be closer to 20%.

A material breach would allow Musk to drop his takeover attempt of Twitter without paying the $1 billion termination fee, though Twitter will doubtlessly argue that the issue does not constitute such a breach, and the case would likely end up in court.

In what could amount to even more trouble for Twitter, Texas attorney general Ken Paxton said he has launched an investigation into the company for "potentially false reporting over its fake bot accounts."

Permalink to story.

 

Dimitriid

Posts: 2,216   +4,268
Pretty sure we've known for several weeks it was the other way around: Musk's chicanery tanked the value of twitter below even what he was planning to pay for it plus he was doing all kinds of illegal crap over it but now he's trying really hard to imply otherwise.

Stop trying to gaslight the public: you just (*!@# up that's all.
 

wiyosaya

Posts: 7,831   +6,813
Musk claims
IMO, that sums it up. Musk claims a lot of crap, then walks it back. Musk knows fools listen to him and that fools listen to him, it grants him influence.

IMO, Most of Musk's claims turn out to be gas passed through his various bodily orifices. Why anyone listens to this guy is beyond me. Having more money than anyone else in the world is not equal to him having a like intelligence. We've seen this pattern before with people like Bill Gates, yet the masses are still fooled into thinking these billionaire twits are the equivalent of earthly gods.
 

AlaskaGuy

Posts: 397   +302

ScottSoapbox

Posts: 339   +600
Expect Florida to file suit against Twitter seeing how Florida's state pensions are tied to Twitter's stock.

Nice insight!
 

scavengerspc

Posts: 2,653   +2,871
TechSpot Elite
When Musk was just thinking stuff up, he made billions and became the richest person in the world.
Then he started talking, and did this:

90


And suddenly he lost 25-30% of his worth.

That cant be a coincidence.
 

waclark

Posts: 439   +305
Pretty sure we've known for several weeks it was the other way around: Musk's chicanery tanked the value of twitter below even what he was planning to pay for it plus he was doing all kinds of illegal crap over it but now he's trying really hard to imply otherwise.

Stop trying to gaslight the public: you just (*!@# up that's all.
Maybe, but you have to admit that a company that positions its value based on number of users and then falsifies the true numbers of users isn't accurately reflecting it's true value.

Of course a platform that claims to be open and unbiased, while half of its employees are rolling on the floor throwing temper tantrums like a 2 yr old because Musk might buy the company and force them to be open and unbiased, is entertaining as hell.
 

Ojref

Posts: 31   +43
When you do any acquisition or merger, part of that process involves discovery and valuation analysis. Its similar to how purchasing a used home works in that you put down earnest money to secure the contract (intent to buy), then the buyer has an option period in which they can bring in inspectors/appraisers and determine what the property is worth and what defects are present.

That audit, or discovery informs the purchasing entity of the actual value and credence of the offering. That's where Musk's team is at right now. No conspiracies, any investor group or anyone else would be doing the same. If Twitter is acting in bad faith and misrepresenting their actual userbase and therefore overall value, that's already long since impacted the progression of their company value and stock value. Not just this particular transaction, but to the investors along the progression of its current valuation. Following that, if evidence were found that indeed Twitter was falsifying user data, it would make them liable for both financial and criminal issues. It would certainly warrant a SEC and/or FTC investigation in the US.
 

captaincranky

Posts: 18,802   +7,729
I just have one question, if Twitter is turning a profit, WTF do they need with Elon Musk?

Musk is pulling the old "dollar on a string trick". He made a highball bid, and now he's walking it back. Apparently, stockholders bit down so firmly on the hook, they think they need him.
 

Tom Yum

Posts: 178   +420
It is a shame that this article misses some pretty significant points that undermines Musk's claims completely. Probably the biggest is that Musk inexplicably waived business due diligence as a condition of the contract. Business due diligence is exactly this, the opportunity to verify the business fundamentals like mDAU in Twitter's case. Waiving that is like waiving a building and pest inspection on a house, if you do that then you have no recourse latter to cancel the contract if you find out later all the floor joists are rotten and the foundations are made of paper mache.

The second is that the contract between Musk and Twitter has a performance provision that allows Twitter to force Musk to complete the transaction, unless either party can show a material breach of contract, which is what Musk is now trying to allege. Except he has no proof, and by waiving his right to business due diligence he has no recourse for claiming mDAU figure errors are a material breach.

Lastly, even before the acquisition agreement was struck, Musk is on record stating that Twitter had too many spam accounts and that he would fix this if he bought it. That makes it harder for him to use the amount of spam accounts as a reason to walk out of the deal, because any court would take that as evidence he knew about the issue prior to signing the deal. Therefore even if he could prove spam accounts were more than 5% of mDAU, he can't claim it represents a material breach, because he knew about it and signed the deal anyway.

Musk is basically stuck legally, the Twitter board are obligated to complete the transaction on behalf of shareholders who approved the deal, they have a contract with Musk where he signed away business due diligence, and has a performance provision that allows the Twitter board to force Musk to complete the deal unless he can show a material breach, which he can't because he waived business due diligence.
 

Tom Yum

Posts: 178   +420
I just have one question, if Twitter is turning a profit, WTF do they need with Elon Musk?

Musk is pulling the old "dollar on a string trick". He made a highball bid, and now he's walking it back. Apparently, stockholders bit down so firmly on the hook, they think they need him.

Shareholders don't think they need him, they just think that the price offered is worth more than what the business is worth, and so want to cash out for profit. I don't need to sell my house, but if someone offered me $2mil for it tomorrow I'd sell in a heartbeat, because it ain't worth anything near that, nor will be in the next 20 years.

And he didn't make a bid, he made an agreement, signed by both parties and approved by Twitter shareholders. That makes it difficult to walk back from, for the reasons I stated above.
 

wiyosaya

Posts: 7,831   +6,813
Twitter lied, their stock prices died.
I could always argue that their business model was unsustainable. Let's face it, its based on phantoms that will not necessarily generate sales for anyone mining the data they provide - even if it were all factual.
 

Reinette Tineker

Posts: 32   +38
Twitter is "actively resisting and thwarting" his information rights by refusing to provide information on the number of fake, spam, and bot accounts that have long been a problem on Twitter.

--After the election, confidence in the democratic media is at 1%. Twitter and google, amazon and CNN, NYT, WP, facebook-meta, instagram - they all lie.
 

scavengerspc

Posts: 2,653   +2,871
TechSpot Elite
Twitter is "actively resisting and thwarting" his information rights by refusing to provide information on the number of fake, spam, and bot accounts that have long been a problem on Twitter.

--After the election, confidence in the democratic media is at 1%. Twitter and google, amazon and CNN, NYT, WP, facebook-meta, instagram - they all lie.
What did they lie about? I ask you, hoping you know the difference between a lie and a mistake. And what do you think about the level of truth from Fox and OAN?