Twitter has regularly disclosed in quarterly securities filings that it believes no more than 5% of the accounts on the site are fake or automated. And from the moment Musk began expressing fears of the bots’ pervasiveness, the company maintained it was satisfying its obligations under the terms of the purchase agreement.
Still, the stakes rose on June 6, when Musk’s attorneys filed a letter indicating that part of Musk’s financing for the deal was contingent on his receiving the bot information to evaluate the business.
Musk “is clearly entitled to the requested data to enable him to prepare for transitioning Twitter’s business to his ownership and to facilitate his transaction financing,” the lawyers wrote.
On June 8, the Washington Post reported Twitter had subsequently given access to even more information, including a raw feed of account activity.
“The whole issue of spam on the platform has been an issue for years,” said Ann Lipton, a law professor at Tulane University. “It would be surprising if that’s what gave him cold feet now.”
On June 14, Twitter issued a statement saying it “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 intend to close the transaction and enforce the merger agreement at the agreed price and terms.”
Nevertheless, on Thursday, the Washington Post reported the deal was in jeopardy because Musk felt he could still not verify the number of bot accounts on the platform.
Many commentators believe that given Twitter’s apparent compliance with Musk’s information requests, the spat over bots was instead a pretext for Musk to walk away from the deal entirely. They note that since Musk agreed to purchase the company at $54.20 a share, Twitter’s stock price has fallen to $36.81, shaving some $14 billion off its total value.
“If he were really concerned about the bot info, he’d sue,” Lipton said. “It seems more likely that it’s not really about that. Instead, he wants to claim Twitter is in breach of contract, so he doesn’t have to close.”
Although both sides agreed to pay $1 billion should either party withdraw from the agreement, Columbia University law professor Eric Talley says it is not simply a matter of Musk paying $1 billion to walk away. According to the terms of the agreement, Twitter likely believes it would first be able to ask a judge to force Musk to purchase the company, under what is known as a “specific performance” clause.
“There’s a real question of whether the $1 billion break fee sits second fiddle to Twitter’s option to ask for specific performance,” Talley said.
Talley also said the merger agreement explicitly notes that if Musk deliberately breaches the agreement, the $1 billion breakup fee is not the exclusive remedy.
By Rob Wile | NBC News