JUNE 6, 2022
Elon Musk threatened to terminate his deal to buy Twitter Inc. in a letter accusing the company of not complying with his request for data on the number of spam and fake accounts on the social-media platform.
Mr. Musk said Twitter has refused to provide the data necessary for Mr. Musk to facilitate his own evaluation of the number of spam and fake accounts. In April, Twitter accepted Mr. Musk’s $44 billion bid to take over the company and go private. As part of the deal, Mr. Musk waived detailed due diligence that buyers typically perform on targets.
In a letter to Twitter Chief Legal Officer Vijaya Gadde, Mr. Musk’s lawyer Mike Ringler said Mr. Musk is entitled to the requested data, in part so that he can facilitate the financing of the deal.
Mr. Musk has lined up a group of 19 investors to back his deal. He has also said in filings that he is holding talks with other current Twitter shareholders, including co-founder Jack Dorsey, to roll their shares over into the private company.
“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,” Mr. Ringler wrote. “At this point, Mr. Musk believes Twitter is transparently refusing to comply with its 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,” he said.
Representatives for Twitter didn’t immediately return a request for comment. The company has said it was moving forward with the transaction. Shares of Twitter fell 5% to $38.05 in morning trading; the all-cash deal is priced at $54.20 a share.
For years, Twitter had publicly disclosed its own estimate of how many of its daily active users represent false or spam accounts, putting the percentage at fewer than 5% of its daily active users. Mr. Musk has pegged the figure at least four times as high at 20% of Twitter’s accounts.
Twitter CEO Parag Agrawal on May 16 tweeted that the company had shared information with Mr. Musk about how it estimates spam figures. Mr. Musk responded with a poop emoji.
In his letter Monday, Mr. Ringler confirmed Mr. Musk received a response from Twitter on June 1, but said it didn’t satisfy Mr. Musk’s requests.
Mr. Musk offered to buy Twitter for $44 billion in April, and the company agreed to the deal the same month. In May, the Tesla Inc. chief executive said the deal was “temporarily on hold” because of his concerns over the company’s accounting of the number of fake accounts on its platform.
Mr. Musk’s escalation of the bot issue last month raised suspicions among observers that he is using it as a negotiating tactic to lower the price amid a swooning market, or to exit the takeover deal.
As part of the deal, both sides agreed to pay each other a $1 billion breakup fee if they cause the deal not to happen for certain reasons, but specific scenarios must unfold for those to become relevant. Twitter could also sue to force Mr. Musk to go through with the transaction.
The Tesla CEO has complained about fake accounts on Twitter for years—long before he agreed to buy the platform. In 2018, he tweeted, “Lots of fake accounts on Twitter characterized by high following/follower ratio to make it seem like many real people when it isn’t. Wonder why.”
On Saturday, Mr. Musk brought attention to a tweet suggesting spam and bots were being used for “misinformation and fake news against Elon.” Mr. Musk’s one-word reply to the tweet, “Interesting,” got more than 20,000 likes.
Spam and fake accounts are an industry wide problem and can cause problems for advertisers and bad experiences for users. The accounts can be difficult to detect and are commonly managed by bots, which are computer programs that can automate posts and replies. Many bots have been programmed to achieve illicit goals, such as spreading false information and tricking people into spending money, tech and social-media analysts say, but others have more benign purposes, such as sharing news and weather alerts.
Mr. Musk has had unusually extensive interactions with bots. As a habitual tweeter with more than 95 million followers, the Tesla CEO likely has far greater exposure and experience with fake and spam accounts than most on the social-media platform, researchers say. Around 70% of Mr. Musk’s followers on Twitter are spam, fake or inactive, versus 41% for all other accounts with between 65 million and 120 million followers, according to an estimate last month from SparkToro LLC, a maker of audience-research software.