Musk looks to end acquisition, says Twitter hasn't provided required data

[Jimmy2x]

In a nutshell: Elon Musk appears to be making good on his previous threats to walk away from the 44 billion dollar deal to buy Twitter. The SpaceX CEO's legal team filed a letter with securities regulators, claiming the media giant and Musk entered into the purchase agreement based on false and misleading representations. Unfortunately for Musk, Twitter's Board of Directors disagrees and is gearing up for legal actions to hold him accountable for the originally negotiated multi-billion-dollar price tag.

The letter, filed by Musk's legal counsel on Friday, claims Twitter's representatives did not comply with contractual obligations to provide information regarding the prevalence of bots, spam accounts, and other fake accounts across the platform. Musk's legal team representative Mike Ringler says Twitter has ignored requests for information multiple times, provided unjustified rejections to queries, or responded to Musk with incomplete or inaccurate information while claiming they've complied with full disclosure.

Musk's claims that Twitter has not been forthcoming with account-related data is nothing new. The statements stretch back to May when the outspoken CEO stated the buyout was on hold until Twitter provided facts supporting claims in a previously published Reuter article. Musk and his team remain adamant that the information is necessary to conduct a thorough analysis of bots and other fake accounts across the social media platform.

Twitter representatives do not appear to be taking the accusations lying down. Despite the claims that the media platform has been withholding information relevant to the negotiated acquisition, the head of Twitter's Board of Directors, Bert Taylor, was clear that the company would pursue legal action and intended to enforce the previously negotiated acquisition terms.

The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.

— Bret Taylor (@btaylor) July 8, 2022

While the outcome is yet to be determined, news of Musk's intent already seems to have impacted Twitter's bottom line. Financial data showed stock values dropping between 5% and 6% on the heels of his statements.

There's no legal guarantee that Musk will be allowed to walk away from the already negotiated multi-billion dollar deal. According to the standing agreement, either Twitter or Musk could be liable for a one-billion-dollar break-up fee should either party walk away from the agreed-upon offer.

There are also several other potential outcomes, ranging from a renegotiated purchase price or break-up penalties to another bidder stepping up in an attempt to take over the acquisition. Any guesses as to the outcome will be nothing more than speculation until more information becomes available.

Permalink to story.

https://www.techspot.com/news/95238-musk-twitter-hasnt-provided-required-data-looks-end.html

 

[Uncle Al]

This will be a case that depends upon the court either following or ignoring contract law. Even if they follow contract law, they are limited to what they can make Musk do and any financial penalties are a drop in the bucket compared to the actual deal. Just another example of the need for review and update of such laws .....

 

[Endymio]

Just another example of the need for review and update of such laws .....

How so? Let's consider the possibilities

Case 1: Twitter was indeed willfully misrepresenting their user base, and thus the value of the company. Musk is thus rightfully entitled to walk away from the deal.
Case 2: Twitter did nothing wrong whatsoever, and therefore if Musk refuses to consummate the deal, they're entitled to their actual damages from the offer, plus any penalties specified by the tender contract.

In either case (or the more likely scenario of a true situation somewhere between the two extremes) a jury will decide, and find appropriately. There's nothing wrong with basic contract law here.

 

[nnguy2]

A development that shocked no one but the easily fooled maga crowd.

 

[Endymio]

A development that shocked no one but the easily fooled maga crowd.

You mean, and the millions of far-Left Twitter-denizens who tweeted incessant outrage over the acquisition. Many celebrities even announced they were quitting Twitter permanently as a result.

 

[nnguy2]

You mean, and the millions of far-Left Twitter-denizens who tweeted incessant outrage over the acquisition. Many celebrities even announced they were quitting Twitter permanently as a result.

They raged then they moved on. You keep on believin'

 

[MaitieS]

They raged then they moved on. You keep on believin'

Typical Twitter drama in a nutshell.

 

[captaincranky]

Oh well, so much for Musk's "ideals", toward "freedom of speech".

For those of you that weren't aware of it, he was trying to finance the deal. Maybe his credit application was turned down. This sort of thing can happen when you run into a bunch of stodgy bankers that don't believe, (as he does), that you're the second coming.

But then, Twitter's loss could prove to be "Truth Social's", gain..

 

[nnguy2]

Typical Twitter drama in a nutshell.

Musk got caught up in his grandiosing and drama. Now he's gonna have to pay billions dollars for the drama.

 

[Darth Shiv]

You mean, and the millions of far-Left Twitter-denizens who tweeted incessant outrage over the acquisition. Many celebrities even announced they were quitting Twitter permanently as a result.

There are two things here. Everyone knew the deal wasn't done but don't pretend Twitter was the party stopping the deal. This article proves Twitter wants the deal done. Which results in what exactly? A person running the show who thinks there is no bar too low for speech on a PRIVATE platform.

Let's be clear - I am a huge fan of what Musk did for EVs but I don't think he should be involved in social media platforms. He's off the mark there.

 

[MyIOnU]

Twitter price should be half of that, since haft of the accounts are just bots.

 

[merikafyeah]

A one billion dollar fine is a lot easier to swallow than 44 billion dollars of regret.

 

[Endymio]

Everyone knew the deal wasn't done but don't pretend Twitter was the party stopping the deal.

No. First, Twitter's board blocked the sale, and refused to even allow a shareholder vote on the offer. Faced with threats of a shareholder suit for breach of fiduciary duty, they reversed that decision -- but refused to give Musk's team data to verify their user base, figures upon which not only the entire value of the company is based, but ones which if demonstrated fraudulent, open Twitter (and Twitter's new ownership) up to enormous claims of damages from every past advertiser they've ever had.

Now, after months of legal wrangling, Twitter's board grudgingly agreed to provide some sort of data -- but, according to Musk's team, it is inadequate to verify their claims. So who's telling the truth? Given their past actions, and the fact that even Twitter's most ardent supporters have long claimed their bot problem is far larger than they're willing to admit -- my money is on Musk.

 

[nnguy2]

No. First, Twitter's board blocked the sale, and refused to even allow a shareholder vote on the offer. Faced with threats of a shareholder suit for breach of fiduciary duty, they reversed that decision -- but refused to give Musk's team data to verify their user base, figures upon which not only the entire value of the company is based, but ones which if demonstrated fraudulent, open Twitter (and Twitter's new ownership) up to enormous claims of damages from every past advertiser they've ever had.

Now, after months of legal wrangling, Twitter's board grudgingly agreed to provide some sort of data -- but, according to Musk's team, it is inadequate to verify their claims. So who's telling the truth? Given their past actions, and the fact that even Twitter's most ardent supporters have long claimed their bot problem is far larger than they're willing to admit -- my money is on Musk.

Elon Musk in April: I will buy Twitter and crush the spambots
Elon Musk in July: No one told me about spambots!

 

[netman]

Good, Musk owes twitter $1 billion and Donald Trump chance of rejoining Twitter is doomed...!

 

[scavengerspc]

Good, Musk owes twitter $1 billion and Donald Trump chance of rejoining Twitter is doomed...!

I get it but to be honest, I think that's a bad thing.
I was really looking forward to the whole world easily seeing what the trumpanistas and their orange god is saying and "thinking".

That circus will be missed.

 

[Lew Zealand]

A one billion dollar fine is a lot easier to swallow than 44 billion dollars of regret.

Excellent summation of avoiding the sunk cost fallacy.

 

[Endymio]

Elon Musk in April: I will buy Twitter and crush the spambots
Elon Musk in July: No one told me about spambots!

In Orwell's '1984', citizens of the regime were trained to not only rewrite inconvenient historical facts, but to believe implicitly in their revisions, even when the new version contained inherent absurdities or contradictions.

I'll leave it to you to find the relationship between this and your post.

 

[mizkitty]

Musk already signed the merger agreement..."due diligence" has nothing to do with it...
He literally agreed to buy Twitter...in writing.

 

[p51d007]

Heck, other than the "bubble" in April of this year, after Musk said he was going to buy it, the price has been DROPPING. Musk, if anything else, "discovered" they were lying about their user base, which makes the company of "less value".

 

[Endymio]

He literally agreed to buy Twitter...in writing.

The purchase agreement included multiple conditions, of course. And even if it did not, there would still be grounds to terminate, if the company's public statements and/or SEC filings were found to be fraudulent or materially misrepresentative of the company's status.

It seems quite clear that Twitter has been fudging the account figures, at the very least. In May, they're claimed they were "deleting 500,000 bot accounts per day". In June, that figure suddenly and inexplicably jumped to one million a day. And they've spent months fighting attempts by Musk -- and the rest of the world -- to verify their claims that bots account for only 5% of their total daily user base,

 

[Tom Yum]

And they've spent months fighting attempts by Musk -- and the rest of the world -- to verify their claims that bots account for only 5% of their total daily user base,

Argh, this again. Twitter has never claimed that bot accounts are less than 5% of total accounts. What they claim is that bot accounts are less than 5% of monetorised daily average users (mDAU), ie accounts that see ads through the Twitter app or website. Most bots don't see ads, it would be a waste of bandwidth and they don't need to as they directly interact with tweets through the Twitter API, bypassing the Twitter app and ad-serve network on the Twitter website. Twitter cares about mDAU because it is the metric advertisers (Twitters main revenue stream) care about, they pay based on how many eyeballs are seeing ads.

Of cause, Elon knows this but ignores it because it doesn't give him the 'out' he needs to avoid this bad deal (that he literally proposed and was accepted). He instead keeps rabbitting on about the % of total users because he knows it is basically impossible to measure (and therefore verify), but it is irrelevant because a material breach can only be based on something Twitter has said that is proven to be false and materially influenced the decision to invest/purchase.

The fact Elon is on record pre-deal declaring he wants to end the bots also hurts his case because it shows he was aware of the bot issue when making the deal. That makes it harder to claim a material breach, independent of the fact Twitter has never stated the % of bots against the total number of users.

 

[nnguy2]

Argh, this again. Twitter has never claimed that bot accounts are less than 5% of total accounts. What they claim is that bot accounts are less than 5% of monetorised daily average users (mDAU), ie accounts that see ads through the Twitter app or website. Most bots don't see ads, it would be a waste of bandwidth and they don't need to as they directly interact with tweets through the Twitter API, bypassing the Twitter app and ad-serve network on the Twitter website. Twitter cares about mDAU because it is the metric advertisers (Twitters main revenue stream) care about, they pay based on how many eyeballs are seeing ads.

Of cause, Elon knows this but ignores it because it doesn't give him the 'out' he needs to avoid this bad deal (that he literally proposed and was accepted). He instead keeps rabbitting on about the % of total users because he knows it is basically impossible to measure (and therefore verify), but it is irrelevant because a material breach can only be based on something Twitter has said that is proven to be false and materially influenced the decision to invest/purchase.

The fact Elon is on record pre-deal declaring he wants to end the bots also hurts his case because it shows he was aware of the bot issue when making the deal. That makes it harder to claim a material breach, independent of the fact Twitter has never stated the % of bots against the total number of users.

You're wasting your energy trying to logic Musk's online white knight.

 

[Endymio]

Twitter [claims] that bot accounts are less than 5% of monetorised daily average users (mDAU), ie accounts that see ads through the Twitter app or website

So why don't they provide the data to demonstrate this? Other media firms go through exhaustive external audits by independent agencies to verify their circulation figures ... Twitter, however, claims such an audit is "impossible", and that advertisers should simply trust in their honesty.

Of cause[sic], Elon knows this but ignores it because it doesn't give him the 'out' he needs

You're misinformed on the subject. Bots are merely one of the issues the Twitter board has failed to address, others being, according to SEC filings:

"...failure to provide [a] including a working, bottoms-up financial model for 2022, a budget for 2022, an updated draft plan or budget, and a working copy of Goldman Sachs’ valuation model underlying its fairness opinion."

https://www.sec.gov/Archives/edgar/data/0001418091/000110465922078413/tm2220599d1_ex99-p.htm

The fact Elon is on record pre-deal declaring he wants to end the bots also hurts his case, because it shows he was aware of the bot issue when making the deal.

Oops! You've just contradicted your earlier point. Musk -- and the rest of planet Earth -- was obviously aware that bots existed. The "bot issue" Musk wanted to correct was their contribution to Tweet spam. The issue of whether or not they're counted into Twitter's daily average user base is a different one entirely.

 

[MaitieS]

Musk got caught up in his grandiosing and drama. Now he's gonna have to pay billions dollars for the drama.

Finally. He's going to pay for his own stupidity. About a time