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Elon Musk fires warning shot at Twitter over bots issue: “This is a clear material breach”

(Credit: Saturday Night Live/Twitter)

Tesla CEO Elon Musk has fired a warning shot at Twitter over his concerns about the social media company’s spam and fake accounts. Musk’s concerns were outlined in a letter to the company on Monday.

The letter, which was included in an amended securities filing, featured several concerns that Musk had about the Twitter deal. As per the letter, Musk believes that Twitter is “actively resisting and thwarting his information rights” by refusing to disclose the specifics of its data on spam and fake accounts.

While Musk and Twitter had already agreed on a $44 billion buyout, Musk noted that he is putting the deal “temporarily on hold” amidst the social media company’s claims that less than 5% of its users are fake or spam accounts. Musk believes that the number is far larger, and he has since demanded clearer data pertaining to Twitter’s own estimates.

“It really depends on a lot of factors here. I’m still waiting for some sort of logical explanation for the number or sort of fake or spam accounts on Twitter. And Twitter is refusing to tell us. This seems like a strange thing. Like if you said, ‘Okay, I’m going to agree to buy your house’. You say the house has less than 5% termites. That’s an acceptable number. But if it turns out it the right per cent is 90% termites, that’s not okay,” Musk previously said at the All-In Summit.

The letter also noted that Twitter is in a “clear material breach” of its obligations by refusing to provide clear data about the Tesla CEO’s concerns. Musk’s lawyers further noted in the letter that Twitter’s refusal to accommodate Musk’s requests so far is causing further suspicion that information is being withheld.

Following is the letter sent by Musk’s legal team:

“We are in receipt of correspondence sent on Twitter’s behalf dated June 1, 2022, responding to Mr. Musk’s request for the data and information described in my letters dated May 25, 2022 and May 31, 2022.

“Mr. Musk does not agree with the characterizations in Twitter’s June 1 letter. Twitter has, in fact, refused to provide the information that Mr. Musk has repeatedly requested since May 9, 2022 to facilitate his evaluation of spam and fake accounts on the company’s platform. 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.

“Twitter’s effort to characterize it otherwise is merely an attempt to obfuscate and confuse the issue. Mr. Musk has made it clear that he does not believe the company’s lax testing methodologies are adequate so he must conduct his own analysis. The data he has requested is necessary to do so.

“As noted, under various terms of the merger agreement, Twitter is required to provide data and information that Mr. Musk requests in connection with the consummation of the transaction. Twitter’s obligations to provide Mr. Musk with information is not, as the company’s June 1 letter suggests, limited to a “very specific purpose: facilitating the closing of the transaction.” To the contrary, Mr. Musk is entitled to seek, and Twitter is obligated to provide, information and data for, inter alia, “any reasonable business purpose related to the consummation of the transaction” (Section 6.4).

“Twitter must also provide reasonable cooperation in connection with Mr. Musk’s efforts to secure the debt financing necessary to consummate the transaction, including by providing information “reasonably requested” by Mr. Musk (Section 6.11). Mr. Musk’s requests for user data not only satisfies both criteria, but also meets even Twitter’s narrowed interpretation of the merger agreement, as this information is necessary to facilitate the closing of the transaction.

“As Twitter’s prospective owner, Mr. 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. To do both, he must have a complete and accurate understanding of the very core of Twitter’s business model—its active user base. In any event, Mr. Musk is not required to explain his rationale for requesting the data, nor submit to the new conditions the company has attempted to impose on his contractual right to the requested data.

“At this point, Mr. Musk believes Twitter is transparently refusing to comply with its obligations under the merger agreement, which is causing further suspicion that the company is withholding the requested data due to concern for what Mr. Musk’s own analysis of that data will uncover.

“If Twitter is confident in its publicized spam estimates, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to independently evaluate those estimates. As noted in our previous correspondence, Mr. Musk will of course comply with the restrictions provided under Section 6.4, including by ensuring that anyone reviewing the data is bound by a non-disclosure agreement, and Mr. Musk will not retain or otherwise use any competitively sensitive information if the transaction is not consummated.

“Based on Twitter’s behavior to date, and the company’s latest correspondence in particular, Mr. Musk believes the company is actively resisting and thwarting his information rights (and the company’s corresponding obligations) under the merger agreement. This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement.”

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Elon Musk fires warning shot at Twitter over bots issue: “This is a clear material breach”
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