ELON MUSK FACES IMPEDIMENTS TO CANCELING HIS TWITTER PURCHASE
By: Alina Zheng
On July 8th, Elon Musk withdrew his $44 billion offer to purchase Twitter because of the insufficient evidence provided to him regarding the number of spam accounts on the platform. The decision will consequently land him in a legal battle against Twitter.
After announcing to buy Twitter on April 21st, Musk stated that he would back out of the deal in May because Twitter failed to supply enough evidence about their spam and fake accounts, saying the deal was “temporarily on hold.”
Since the company asserted that its spam and bot accounts comprise only 5% of Twitter’s users, Musk requested evidence to back the claim. Spam accounts are designed to spread information to large numbers of people, and Musk believes that spam or bot accounts could compose 30% or more of Twitter users.
In a letter filed with the US Securities and Exchange Commission, Musk’s lawyer stated Twitter hasn’t been able to fulfill Musk’s demands:
"Sometimes Twitter has ignored Mr. Musk's requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information.”
However, it may be too late for Musk to halt the deal. The contract that Musk signed stated that if either side ended the deal, they would face fines of $1 billion owed to the other party. The merger agreement incorporated in the contract includes also includes a “specific performance clause,” which states that Twitter holds the power to sue Musk and make him proceed with the purchase.
The chair of Twitter’s board formally announced it planned to sue after Musk’s statement, tweeting, "The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.”
There may be more to the reason behind why Musk backed out of the deal. The stock market prices for large technology companies have dramatically dropped in the past few months. Tesla’s share price has also fallen significantly after Musk announced his plan to purchase Twitter.
Since announcing his decision to acquire Twitter, Musk has promised to loosen Twitter’s content censorship once he owned the company. However, because of Musk’s recent statement regarding his decision to pull out of the Twitter deal, Twitter’s future continues to remain unclear.