Elon Musk told Twitter Inc (TWTR.N) on Monday that if it fails to supply him with data on spam and bogus accounts, he may walk away from his $44 billion offer to buy the social media giant.
This isn't the first time Musk has hinted that his takeover of Twitter could not go through. However, the warning, which came in the form of a letter from Musk's attorneys to Twitter's chief legal officer, Vijaya Gadde, signified a significant step forward. It accused Twitter of "materially breaching" its contract commitments.
Musk's warnings to terminate the agreement have coincided with a drop in numerous technology equities, including Tesla Inc (TSLA.O), which he heads, on fears about an economic slowdown and increased interest rates.
On Monday, Twitter shares fell 1.5 percent to $39.57, a significant discount to the planned $52.20 purchase price, as investors wagered Musk will either persuade Twitter to accept a lesser deal price or walk away from the agreement.
Musk's attorneys reaffirmed their request for facts on bot accounts in a letter to Twitter, saying he reserved all rights to cancel the transaction because the business had failed to meet its duties in a "clear material violation."
Twitter replied by stating that it intended to ensure the deal's completion on the agreed-upon conditions. "In order to complete the acquisition in accordance with the terms of the merger agreement, Twitter has and will continue to cooperatively exchange information with Musk," the firm stated in a statement.
Musk, a self-proclaimed free-speech absolutist, has stated that removing "spam bots" from the platform will be one of his top goals.
In mid-May, he announced that the Twitter transaction was "temporarily on hold," stating that he will not forward with the offer unless the firm can prove that spam bots make up less than 5% of its overall users. He has stated that spam bots account for at least 20% of the user base. find out more
According to independent analysts, 9 percent to 15% of the millions of Twitter identities might be bots. find out more.
Musk wrote in his letter that he wants the information to perform his own research of Twitter users because he doesn't trust the company's "loose testing techniques." Twitter has stated that it stands by its forecasts and that it is unable to reveal private information on how they are generated.
"He's attempting to back out of the Twitter transaction, and this is the first shot across the bow," according to Wedbush analyst Dan Ives.
The caveats Twitter employed in its forecasts on spam accounts, according to legal experts, provide it some protection against prospective lawsuits, whether from Musk over the transaction or shareholders over the integrity of the company's regulatory representations.