Patrick Pleul/AP/Shutterstock / Patrick Pleul/AP/Shutterstock
Elon Musk now says Twitter’s lack of information about its user base represents a “material breach” of the terms of the merger, according to a Securities and Exchange Commission (SEC) filing. The news sent Twitter shares down 3.9% on the morning of June 6.
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In a letter to Twitter filed with the SEC on June 6, Musk’s attorneys write that “based on Twitter’s behavior to date, and the company’s latest correspondence in particular, Mr. Musk believes that the company is actively resisting and frustrating its rights to information (and the Company’s corresponding obligations) under the Merger Agreement This is a clear and material breach of Twitter’s obligations under the Merger Agreement. merger and Mr. Musk reserves all rights resulting therefrom, including his right not to complete the transaction and his right to terminate the merger agreement.
The attorneys also wrote that Musk “is clearly entitled to the requested data to enable him to prepare for the transition of Twitter’s business to his ownership and to facilitate the financing of his transaction.”
As such, they argue that he must have a full and accurate understanding of the very heart of Twitter’s business model – its active user base and that Musk is not required to explain his rationale for requesting the data.
“At this point, Mr. Musk believes Twitter is transparently refusing to comply with its obligations under the merger agreement, raising further suspicion that the company is withholding requested data due to concern what Mr. Musk’s own analysis of that data will be. find out,” the lawyers added. “While Twitter is confident in its published spam estimates, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to independently assess these estimates.”
Wedbush Securities analyst Dan Ives tweeted that Musk’s latest decision “speaks to our thesis over the past few weeks that the spam/bot problem was going to be the ‘material breach’ cited by Musk to try to get out of of TWTR deal $1 billion break fee; Twitter Board will clearly fight this. Help remove major overhang on Tesla; Twitter stock is under pressure.
Last month, the richest man on the planet backtracked on his original offer, saying spam and bots accounted for at least 20% of the social media platform’s users, more than the “less 5%” that Twitter had disclosed in filings, as GOBankingRates previously reported.
“I’m concerned that Twitter has a chilling effect on reducing spam because it reduces perceived daily users,” Musk tweeted on May 21. still refuse to explain how they calculate that 5% of daily users are fake/spam! Very suspicious.”
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Shares of Twitter have fallen since announcing the $44 billion acquisition in April – they are down 22.5% last month and 9.6% since the start of the year.
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