Yahoo Finance Elon Musk says Twitter is in 'material breach' of merger agreement
Tesla CEO Elon Musk is raising another obstacle in his $44 billion bid to buy Twitter (TWTR).
In an SEC filing released Monday morning, Musk's counsel said Twitter has not coughed up adequate data on the company's users, committing a "clear material breach" of the company's obligations as part of its merger agreement.
"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," the letter reads. "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."
Twitter stock fell around 5% on the news.
Musk's complaint stems from Twitter's insistence that the social media platform does not have a problem with bots, an issue that the world's richest person has flagged since announcing a deal to acquire Twitter for $54.20 per share on April 25. Shares of Twitter have dropped more than 17% since the deal was announced.
In a statement to Yahoo Finance on Monday, a Twitter spokesperson said: "Twitter 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 believe this agreement is in the best interest of all shareholders. We intend to close the transaction and enforce the merger agreement at the agreed price and terms."
Over the last several weeks, Musk has raised various concerns about Twitter's user base, challenging the veracity of the company's claims that just 5% of its reported users are bots.
In mid-May, Musk famously responded to a thread from Twitter CEO Parag Agrawal outlining the company's current processes with a poop emoji. Later that month, Musk said that the way Twitter calculates the estimated number of bots on its platform is "very suspicious."
Musk's team now claims that Twitter is not providing access to information that could get to the bottom of these claims, noting that Musk requested data from Twitter in letters sent to the company on May 25 and May 31.
"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," Monday's letter reads. "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."
The letter later adds that 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."
Musk faces a $1 billion fee if he calls off the $44 billion agreement to buy Twitter; a contract breach by Twitter could change that penalty.
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Myles Udland is the senior markets editor at Yahoo Finance. Follow him at @MylesUdland
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