Elon Musk Formally Seeks to Terminate Twitter Takeover Deal

It appeared inevitable, and now, Elon Musk has formally filed a movement with the SEC to terminate his $44 billion takeover of Twitter, based mostly on Twitter’s failure to supply correct data on the variety of faux accounts on its platform.

In a letter filed on behalf of Musk and his funding companions at Morgan Stanley, Musk is searching for to cancel the acquisition as a consequence of a ‘material breach of multiple provisions’ of the unique merger settlement.

As per the submitting:

‘[Twitter] seems to have made false and deceptive representations upon which Mr. Musk relied when coming into into the Merger Settlement, and is more likely to undergo a Firm Materials Opposed Impact (as that time period is outlined within the Merger Settlement).”

Musk’s workforce says that, regardless of repeated requests for qualifying data, Twitter had failed to supply them with the information required to make an correct and true evaluation of the variety of faux accounts on its platform.

“While Section 6.4 of the Merger Agreement requires Twitter to provide Mr. Musk and his advisors all data and information that Mr. Musk requests “for any reasonable business purpose related to the consummation of the transaction,” Twitter has not complied with its contractual obligations.”

Musk’s workforce says that it has been searching for extra data from Twitter for almost two months, with Twitter solely offering restricted entry to the required knowledge, in violation of the phrases.

“Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information.”

In whole, Musk’s workforce says that Twitter has failed to supply them with data on:

• Info associated to Twitter’s course of for auditing the inclusion of spam and faux accounts in mDAU
• Info associated to Twitter’s course of for figuring out and suspending spam and faux accounts
• Each day measures of mDAU for the previous eight (8) quarters
• Board supplies associated to Twitter’s mDAU calculations
• Supplies associated to Twitter’s monetary situation

As a result of Twitter has didn’t adjust to these requests inside an inexpensive time interval, that, Musk’s workforce says, is a violation of the deal’s phrases, and is subsequently motive sufficient to cancel the settlement.

The letter additionally notes that Musk’s workforce continues to be unconvinced of Twitter’s metrics, with its personal evaluation of Twitter’s expanded utilization knowledge, which it offered final month, exhibiting that faux accounts are extra prevalent within the app than Twitter claims:

“Preliminary analysis by Mr. Musk’s advisors of the information provided by Twitter to date causes Mr. Musk to strongly believe that the proportion of false and spam accounts included in the reported mDAU count is wildly higher than 5%.”

Musk’s workforce additionally says that, based mostly on its discussions with firm execs, its understanding is that Twitter consists of accounts which have been suspended inside its energetic person metrics, which it says would see Twitter nonetheless together with identified faux and spam accounts inside its publicly reported figures. Musk’s workforce additionally says Twitter’s course of for figuring out the proportion of pretend accounts ‘appears to be arbitrary and ad hoc’, additional clouding their metrics.

Based mostly on these ongoing questions, and Twitter’s failure to supply sufficient justifications for such, Musk and Co. need to pull out, which can now put the onus on the SEC and/or the courts to resolve whether or not the reasoning right here is justified, and the way it strikes ahead, or not, with the merger.

Which could possibly be a catastrophe for Twitter, which has already lower govt jobs and shifted its complete enterprise strategy, in preparation for a pending Musk takeover.

Certainly, this week, studies prompt that Twitter CEO Parag Agrawal is ‘willing to go to war’ in an effort to make Elon Musk comply with by way of together with his takeover bid, even when Musk appears to be like to again out of the method. Agrawal would personally be in for an enormous payday if the Musk deal had been to undergo – however greater than that, the deal falling aside now would elevate vital questions over Twitter’s future, and its capability, as a enterprise, to develop into a extra viable, priceless proposition.

The overriding consensus to date has been that Musk will ultimately should undergo together with his Twitter takeover push both approach, as a result of Musk waived numerous due diligence measures in his preliminary supply, in an effort to expedite the transaction,

However in at present’s letter, Musk’s workforce has additionally offered a notice of readability on this level:

“Despite public speculation on this point, Mr. Musk did not waive his right to review Twitter’s data and information simply because he chose not to seek this data and information before entering into the Merger Agreement. In fact, he negotiated access and information rights within the Merger Agreement precisely so that he could review data and information that is important to Twitter’s business before financing and completing the transaction.”

It appears, then, {that a} stand-off is coming, with Musk now making the transfer that many had anticipated, which can drive Twitter to reply and supply an in depth rationalization of such to the SEC.

Twitter board Chairman Bret Taylor was fast to answer the information:

Will Musk be capable to get out of the deal, or will Twitter certainly be capable to drive Musk to pay up, based mostly on the phrases of the settlement?

It appears to be like like issues are about to get actually ugly, which might solely be dangerous for Twitter as a enterprise.