September 27, 2022

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Elon Musk Threatens to End Twitter Deal Without Information on Spam Accounts

2 min read

Mr. Musk, who signed a deal to acquire Twitter in April, has, in recent weeks, threatened to put the deal “on hold” over its number of fake accounts. Last month, he tweeted that “the deal cannot move forward” until Twitter shows “proof” that these accounts make up less than 5 percent of its users, as Twitter has repeatedly said. He made similar remarks at a conference in Miami, indicating that he may be trying to lay the groundwork to rework the deal.

In doing so, Mr. Musk appeared to be building a case to argue that Twitter had experienced a “material adverse change,” or a change that would significantly affect its business, which could allow him to break off the deal. Legal experts have questioned the merits of that argument, particularly since Twitter has long disclosed that fake accounts represent about 5 percent of its users. Mr. Musk’s letter on Monday, though, represented a new strategy.

“What he is actually doing is a much more clever attempt to get out of the merger agreement,” said Ann Lipton, a professor of corporate governance at Tulane Law School. “If Twitter were really stonewalling information requests, and those information requests were necessary or reasonable for Musk to be able to get his financing — which is what he’s claiming in this letter — then that would conceivably be a breach that allows Musk to walk away.”

Twitter could, in turn, argue it does not have the information that Mr. Musk is demanding, or that it is not necessary for the deal to close, she said.

Lauren Hirsch and Mike Isaac

2022-06-06 12:21:32

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