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In letter to Twitter, Musk threatens to kill merger deal over spam data


Elon Musk's Twitter profile displayed on a computer screen juxtaposed next to a Twitter logo displayed on a phone screen

Getty Images | NurPhoto

Elon Musk today threatened to pull out of his $44 billion deal to buy Twitter in a letter that claimed the company violated the merger agreement by refusing to provide the data behind its spam estimates. Musk needs the data to obtain financing and prepare for the ownership transition, according to the letter sent to Twitter Chief Legal Officer Vijaya Gadde.

“Based on Twitter’s behavior to date, and the company’s latest correspondence in particular, Mr. Musk believes the company is actively resisting and thwarting his information rights (and the company’s corresponding obligations) under the merger agreement,” Musk’s legal team wrote in the letter to Twitter on Monday. “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.”

As we’ve previously written, Musk’s offer to buy Twitter waived “business due diligence,” and the Twitter board relied on that commitment when it approved the transaction and recommended that shareholders vote for it. A Twitter proxy statement told shareholders that one reason to approve the agreement is “the likelihood that other potential acquirers would require substantial due diligence, creating a delay and risk to reaching the signing of such a potential transaction.”

The merger agreement doesn’t give Musk any easy way out. Nonetheless, he began to waffle on his commitment to buy the social network last month, saying the deal is “temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5 percent of users.”

When contacted by Ars today, Twitter said it is complying with the merger agreement and intends to complete the deal. “Twitter has and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement,” the company’s statement said. “We believe this agreement is in the best interest of all shareholders. We intend to close the transaction and enforce the merger agreement at the agreed price and terms.”

Musk claims he’s entitled to data

Twitter says that fewer than 5 percent of monetizable daily active users (mDAUs) are spam or fake. Musk has repeatedly claimed Twitter’s estimate is wrong but his statements referred to different types of calculations—such as the number of bots among all Twitter accounts (whether active or not) or the number of bots among accounts that post tweets every day.

Musk inaccurately described Twitter’s estimate, saying that the company is claiming “the number of real, unique humans that you see making comments on a daily basis on Twitter is above 95 percent.” But Twitter’s definition of monetizable daily active users doesn’t require all of them to make comments every day. The metric includes “accounts who logged in or were otherwise authenticated and accessed Twitter on any given day through twitter.com, Twitter applications that are able to show ads, or paid Twitter products, including subscriptions,” which can include users who merely view other people’s tweets.

Musk was well aware of the spam problem before agreeing to buy Twitter. In the deal announcement, Musk said one of his main goals in buying Twitter is “defeating the spam bots.”

Musk’s new letter says, “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.” Despite Musk waiving due diligence, his letter argued that he is entitled to more spam data “under various terms of the merger agreement.”

The letter continued:

Twitter is required to provide data and information that Mr. Musk requests in connection with the consummation of the transaction. Twitter’s obligations to provide Mr. Musk with information is not, as the company’s June 1 letter suggests, limited to a “very specific purpose: facilitating the closing of the transaction.” To the contrary, Mr. Musk is entitled to seek, and Twitter is obligated to provide, information and data for, inter alia, “any reasonable business purpose related to the consummation of the transaction” (Section 6.4). Twitter must also provide reasonable cooperation in connection with Mr. Musk’s efforts to secure the debt financing necessary to consummate the transaction, including by providing information “reasonably requested” by Mr. Musk (Section 6.11). Mr. Musk’s requests for user data not only satisfies both criteria, but also meets even Twitter’s narrowed interpretation of the merger agreement, as this information is necessary to facilitate the closing of the transaction.





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