Twitter has made misleading representations over the number of spambots on the social network, and hasn’t complied with its contractual obligations to provide information about how to assess how prevalent the bots are, Elon Musk’s representatives said Friday in a letter to Twitter as part of a regulatory filing.
Twitter's shares dropped late on Friday after Musk terminated the deal.
Twitter has made “misleading representations" over the number of spam bots on the social network and hasn’t “complied with its contractual obligations" to provide information about how to assess how prevalent the bots are, Musk’s representatives said Friday in a letter to Twitter as part of a regulatory filing.
Twitter said it will fight back in court.
“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," Bret Taylor, chairman of the board, said in a Tweet. “We are confident we will prevail in the Delaware Court of Chancery."The entire deal has been a frenzied and untraditional affair, largely played out on Twitter’s social network. Musk, the billionaire chief executive officer of Tesla Inc., went from being merely a prolific user to revealing a significant stake in Twitter, and then launching an unsolicited takeover offer -- without detailed financing plans -- within a matter of weeks. The agreement came together at breakneck speed in part because Musk waived the chance to look at Twitter’s finances beyond what was publicly available.
Shortly after deciding, that he wanted to own Twitter in April, Musk cooled on the idea. Meanwhile, the price in the contract looked better and better for Twitter, as the social network started to struggle to sell ads and began a hiring freeze. Its shares were also pounded by a broader market meltdown. Musk’s termination letter torpedoed Twitter stock further and threw the company’s future into heightened disarray after months of chaotic ups and downs, mainly based on Musk’s shifting public statements about the transaction. Employees on Friday were told to refrain from posting on Twitter or Slack about the deal, as it is now considered an ongoing legal matter, according to a person familiar with the situation.
The Tesla CEO had earlier threatened to walk away from the deal if the company can't show that less than 5% of its daily active users are automated spam accounts.
Previously, the world's richest man expressed misgivings and even implied he could walk away from the deal over concerns about what he believes is an abundance of fake accounts. According to the Washington Post, Musk has been unable to pin down the percentage of Twitter accounts that are not genuine, despite being given access to internal data.
Meanwhile, Twitter had said that it removes 1 million spam accounts each day and denied the claim saying, bots are less than 5% of the total users.
The letter outlines the many times' Musk and his team have asked Twitter for more information regarding bots, and not received enough to satisfy his questions.
The information “has come with strings attached, use limitations or other artificial formatting features," making it “minimally useful." Musk believes the number of spam bots to be substantially higher than 5%, he said in the letter, without offering evidence. Musk also argued that Twitter has failed to operate its normal course of business. The San Francisco-based company instituted a hiring freeze, fired senior leaders, and saw other major departures.
“The company has not received parent’s consent for changes in the conduct of its business, including for the specific changes listed above," Musk said in the letter, calling it a “material breach" of the merger agreement.
Musk’s deal with Twitter had included a provision that if it fell apart, the party breaking the agreement would pay a termination fee of $1 billion, under certain circumstances. Legal experts have debated whether the conflict over spam bots is enough to allow Musk to walk away from the deal.
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