Serial entrepreneur Elon Musk’s bid to buy social media platform Twitter Inc (NYSE:TWTR) has taken a new turn as he has threatened potentially to pull out of the deal.
The founder of electric vehicle company Tesla Inc (NASDAQ:TSLA) and space exploration venture SpaceX issued an updated filing to the US Securities and Exchange Commission yesterday to complain that the company was obstructing the provision of material data relating to its platform.
The filing has made analysts wonder how the tryst will end.
Neil Wilson, chief market analyst at Markets.com, said: “We move closer to the inevitable court proceedings.”
In particular, Musk complained that Twitter had refused to provide more information on spam accounts and how they are measured. Musk compared this to a "material breach" of the target company's obligations in the sale process.
“Twitter’s latest offer to simply provide additional details regarding the company’s own testing methodologies, whether through written materials or verbal explanations, is tantamount to refusing Mr. Musk’s data requests,” persons acting on behalf of Musk said in a letter attached to the updated 13-D filing.
“Twitter’s effort to characterize it otherwise is merely an attempt to obfuscate and confuse the issue. Mr. Musk has made it clear that he does not believe the company’s lax testing methodologies are adequate so he must conduct his own analysis. The data he has requested is necessary to do so.”
Musk has claimed that Twitter is “actively resisting and thwarting his information rights” under the merger agreement and further threatened in the updated filing to potentially pull out of the proposed deal.
“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,” the amended filing said.
Musk, who waived performing due diligence on the company, would have to prove a material breach took place in court and that it had an impact on the price he should pay for the company in order to exit the relationship.
In April, Musk agreed to pay $54.2 per share to acquire Twitter, a 38% premium to its closing share price on April 1. His bid values the company at approximately $44 billion. Twitter’s share price has since tumbled, trading at the close of the market yesterday at $39.56.
Effectively, by waiving the option to carry out due diligence on Twitter, Musk did not argue with publicly available information that says bots comprise about 5% of Twitter accounts, said Wilson.
However, the social media platform faces a growing backlash over its tolerance of fake accounts.
Attorney General Ken Paxton said yesterday that he was launching an investigation into Twitter to test claims of “false reporting” over the number of fake bots on its platform.
“Twitter has received intense scrutiny in recent weeks over claiming in its financial regulatory filings that fewer than 5% of all users are bots, when they may in fact comprise as much as 20% or more,” the office of the state attorney general said in a statement.