Musk's €43bn bid for Twitter in 'serious jeopardy'

Tesla chief's team has shut down discussions about funding the deal amid concerns over Twitter's figures on spam accounts

Fri, 08 Jul, 2022 - 18:55

Dan Milmo

The planned takeover of Twitter by Elon Musk is in “serious jeopardy”, according to a report.

Mr Musk’s team has stopped certain discussions around funding for the $44bn (€43bn) deal, according to a report in The Washington Post, citing three people familiar with the matter. The report said Elon Musk had concluded that Twitter’s figures on spam accounts — a bone of contention in the deal — were not verifiable.

Twitter executives defended their spam policy this week, citing a specialist team and automated processes that weed out a million fake accounts a day, but the report stated that access to the company’s feed of public tweet data had still failed to satisfy Musk. Twitter has stated consistently that fewer than 5% of its daily active users are spam accounts — a figure that Mr Musk doubts openly.

The report said a “change in direction” from Mr Musk was likely to come soon, indicating that he will follow through on threats to attempt to walk away from the agreed deal.

However, legal experts said the world’s richest man, who is also Tesla’s chief executive, would struggle to terminate the takeover without a legal fight.

The agreement to buy Twitter contains clauses that include seeking “specific performance”, which means asking a court in Delaware — the US state that has jurisdiction over the deal — to order Mr Musk to carry out the deal at the agreed price of $54.20 a share. The shares traded at around $37 on Friday.

“Eventually, the Twitter board will tire of the shenanigans and will file a suit for specific performance in Delaware,” said Brian Quinn, an associate professor at Boston College law school.

Twitter can also demand a $1bn break fee from Musk if he attempts to renege on the agreement. However, signs of a legal strategy for backing out emerged last month when Mr Musk’s lawyers sent a letter to Twitter warning that a refusal to cooperate over the spam account issue represented a “material breach” of the agreement.

Mr Musk’s legal team is arguing that failure to provide information about false accounts breaches a covenant in the agreement, a promise to act in a certain way during the sale process, which would allow him to walk away from the deal.

Twitter has subsequently provided data for its 500 million daily tweets to reassure Musk but the Washington Post report indicates he has not been satisfied with the results of his team’s subsequent analysis.

Carl Tobias, the Williams chair in law at the University of Richmond, said the deal being in reported “jeopardy” was the latest iteration of buyer’s remorse for Musk.

“The dustup over bots seemed to be pretextual to avoid having to forfeit the $1bn breakup fee. Thus, for weeks, Musk seemed to be saying that he was not comfortable with the deal and he now appears to be attempting to back out of the deal.”