Elon Musk stated Monday that if Twitter Inc. does not share data about spam and false accounts, he will cancel his $44 billion acquisition agreement.
The billionaire wrote to Twitter to reiterate his request for information about bot accounts. He also stated that he has the right to end the merger if the company fails to provide the information in a “clear and significant breach” of its promises.
Twitter shares plunged as high as 5.6 percent, to $37.92. This was a substantial discount to Musk’s $54.20 per share offer, which indicates that investors didn’t expect the deal would close at the agreed price. At the time of writing, the stock was down by 2% and Tesla was up by 1.2 percent.
Twitter stated that it will continue to exchange information with Musk in order to complete the acquisition as per the terms of the merger agreement.
Twitter stated that it would like to close the transaction at the agreed price and parameters.
Musk placed the acquisition on hold in mid-May. He stated that he would not proceed with it until Twitter could prove that spam bots make up less than 5%.
Musk’s intentions of completing the transaction at the agreed-upon cost have been questioned as the takeover process has gone through many twists and turns.
Musk has been known to use Twitter to express his opinions on the acquisition and the company, but this is the first time that he has publicly threatened to leave.
Dennis Dick, a proprietary trader with Bright Trading LLC said, “It is quite evident that he feels buyer’s remorse. He’s doing everything possible to obtain a drop in price, and I believe it will succeed.”
“You can see that he has sold his social media stocks and realized he was overpaid… All of these are basically negotiation techniques to reduce the price.”
Musk has challenged Twitter’s public filings regarding spam accounts. He claimed that they must account to at least 20% of its user base. Parag Agrawal (Twitter’s CEO) expressed dissatisfaction with the company’s handling of spam accounts in a recent tweet.
Musk, who is a self-described free-speech absolutist has said that one of his top goals is to remove “spam bots” from Twitter. Elon Musk, CEO of Tesla Inc. (TSLA.O), owns 9.6% of Twitter and has over 95 million followers.
According to Forbes, Musk is legally required to pay $1 billion in breakup fees if the deal fails to go through. This fee represents a small portion of his $219 billion fortune. Twitter can sue Musk to recover a portion of his $219 billion fortune for “particular performances”. Find out more
Musk wrote that he needed the data to conduct his own analysis of Twitter users. He also stated that he didn’t trust the company’s “loose testing” processes.
According to Wedbush analyst Dan Ives, “He’s trying out to back out of the Twitter transaction and this is the first shot across to the bow.”
Musk secured funding from several high-profile investors including Prince Alwaleed bin Talal, a Saudi Arabian businessman, and Sequoia Capital.