Elon Musk threatens to terminate Twitter deal due to lack of information about spam accounts

Elon Musk

Threatened to stop His contract To purchase

Twitter Inc.

TWTR -1.49%

In a letter accusing the company of not complying with its request for data on the number of spam and fake accounts on the social media site.

Mr. Musk said Twitter has refused to provide the data needed to facilitate the counting of its own ratings. Spam and fake accounts. In April, Mr. Twitter. Accepted the musket $ 44 billion auction To take over the company and go private.

In A letter Revealed to Twitter Chief Legal Officer Vijaya Gade on Monday by a disciplinary filing, Mr. Musk’s attorney, Mike Wrinkler, told Mr Winkler: Musk said he was entitled.

“This is a clear violation of Twitter’s obligations under the merger agreement, and Mr Musk has all rights as a result, including the right to terminate the transaction and his right to terminate the merger agreement,” he said. Wrangler wrote.

A Twitter spokesman said: “The company will continue to share information with Mr Musk to complete the transaction in accordance with the terms of the merger agreement.” He added: “We intend to complete the transaction and implement the merger agreement in accordance with the agreed price and terms.”

Shares of Twitter fell 1.5% to $ 39.57 on Monday; The all-cash deal is priced at $ 54.20 a share.

On Monday, Texas Attorney General Ken Paxton launched an investigation on Twitter, claiming that the company may have misreported its fake bot accounts in violation of Texas fraudulent business practice law. Mr. Paxton’s office has ordered the production of documents on how Twitter calculates and manages its user data and how that information relates to its advertising businesses. He said Twitter would have until June 27 to respond to his requests. The Paxton office said.

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“The Texans have relied on Twitter’s public statements, and almost all of its users are real human beings,” said a Republican. Paxton said. “This is important not only for regular Twitter users, but also for Texas businesses and advertisers who use Twitter for their livelihood.”

Last year Mr. Musk Changed headquarters For his automotive company,

Tesla Inc.,

From California to Texas. The rocket company he runs, Space Exploration Technologies Corporation, also has major operations in Texas.

Mr. Paxton and Twitter have clashed in the past. Last month the Federal Court of Appeals ruled that Texas A law can be enforced The Internet’s largest social media sites, including Twitter, prevent users from suppressing their content based on their point of view. Mr. Paxton responded to the verdict With a tweet He said he supported the law and that the Fifth Circuit “made the right call here.”

Mr. Musk’s latest letter is his clear statement that he may try to drop the deal, which could trigger a protracted legal battle between the two sides. As part of the deal, both sides agreed to pay each other $ 1 billion in breakups if the deal did not work out for some reason. Twitter also Mr. Musk may sue to force him to make the transaction.

Mr. If Musk tries to stay out of the transaction, try to block the deal, or reduce the loan financing, Mr. There are only certain scenes where Musk can pay the end fee.

Over the years, Twitter has made public its own estimate of how many of its daily active users represent false or spam accounts, and holds less than 5% of its daily active users. Mr. Musk Fits the image At least four times as many as 20% of Twitter accounts.

Elon Musk developed a close relationship with Beijing to build Tesla’s business in China. Now he buys Twitter and focuses on freedom of speech, raising concerns about how the WSJ China used the social media platform to promote its views. Photo Description: Sharon Shi

Twitter CEO Barack Agarwal tweeted on May 16th The company shared the information Mr. about how it evaluates spam statistics. With musk. Mr. Musk Responded with a boob emoji.

In his letter on Monday, Mr. Mr. Wrangler tweeted on June 1. Musk confirmed that he had received an answer, but it was Mr. Musk said he was not satisfied with the demands. “If Twitter is confident in its advertised spam ratings, Mr Musk does not understand the company’s reluctance to allow those ratings to be evaluated independently,” the letter said.

As part of the deal, Mr. Musk Detailed attention span Buyers generally act on targets. In Reply to a tweet On Monday, Mr. Musk suggested that due diligence could not be used for any misrepresentations on Twitter.

Mr. Legal experts offered a variety of theories as to what led to Musk and his legal team.

David Hope, a technology and media lawyer with mergers and acquisitions with Gama Law in San Francisco, said:

He said something had happened since Twitter signed the deal, which raised new doubts about the ratings it provided on its site regarding the amount of spam and fake accounts. Musk had to argue, he said.

“I firmly believe there should be some change in the circumstances under which the Muskin Legal Committee raises doubts about the legitimacy of those numbers, but in reality nothing has changed,” Mr. Hope said. “No bombshell.”

The problem of fake accounting Mr. By linking Musk’s ability to finance the deal, his legal team could point the way out as they seek to separate their client from the transaction, said University Professor Ben Meins. South Carolina School of Law. “Obviously funding is needed to complete the transaction,” he said.

According to Eric Daly, a professor at Columbia Law School, Mr. Musk has the right to request information, which Twitter may not be able to share, in doing so would infringe on another person’s legal rights or undermine the company’s competitive position.

In April, he bought Twitter for $ 44 billion. Musk volunteered, and the company agreed to the deal the same month. In May, Tesla’s chief executive said the deal had been “suspended” because of his concerns about the company’s accounting. Number of fake accounts On its platform.

Write to Will Fuer at will.feuer@wsj.com and Sarah e at sarah.needleman@wsj.com. Needleman

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