Elon Musk has warned that he might walk away from his $44 billion offer to acquire Twitter Inc (NYSE:TWTR) if the social media network fails to provide data on spam and fake "spam bot" accounts.
In a letter to Twitter, the billionaire reiterated his request for details on spam bot accounts and said he reserved all rights to terminate the merger as the company was in a "clear material breach" of its obligations by not providing him with the information.
This is the first time Musk has threatened to walk away from the deal in writing as opposed to airing it on Twitter's social media platform.
"Musk believes Twitter is transparently refusing to comply with its obligations under the merger agreement, which is causing further suspicion that the company is withholding the requested data," according to the letter sent by Musk's lawyer and addressed to Twitter's chief legal officer, Vijaya Gadde, seen by Reuters.
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Earlier in May, Musk said he would put the deal "temporarily on hold", while he waits for the social media company to provide data on the proportion of its fake accounts.
Twitter has previously downplayed Musk's warning that the deal was "on hold", arguing the data would help him prepare for his ownership of Twitter and that it was not meant to carry out due diligence and reopen negotiations.
Musk said in his letter that he needed the data to conduct his own analysis of Twitter users and did not believe in the company's "lax testing methodologies", Reuters noted.
Musk, who owns 9.6% of Twitter and is its second-largest shareholder, has said one of his priorities for the Twitter takeover will be to remove spam bots from the platform. The Tesla Inc boss has secured financing for the deal and has pulled in top shareholders, including Saudi Arabian investor Prince Alwaleed bin Talal and Sequoia Capital.
At lunchtime in New York on Monday, Twitter shares were down 2.3% at $39.22, a steep discount to Musk's offer of $54.20 per share, suggesting that investors do not expect the deal to close at the agreed price.
Danni Hewson, AJ Bell financial analyst commented: “Ever since it emerged one of Twitter’s most famous tweeters had snapped up a chunk of the company, market watchers have been enthralled. There have been more twists and turns in this takeover bid than your average soap opera and each story line seems a little more farfetched than the last.
"However, this latest plot twist has been well signposted, the only surprise today is that the story is being played out via traditional channels rather than on the platform at the centre of things. There’s plenty for lawyers to scrap over and at the moment no one would be wise to bet on the ultimate outcome but it’s clear Elon Musk has fallen a little out of love with the idea of owning the platform he described as important to the future of civilisation just a few short months ago.
"As for Twitter shareholders, they’ve been on the kind of ride Mr Musk’s rocket crew might enjoy but many will be feeling a little travel sick about now and calls of ‘are we there yet’ aren’t just being uttered in jest.”
Contact the author at jon.hopkins@proactiveinvestors.com