Elon Musk indicated on Monday that he may back out of his deal to buy Twitter because the company has refused to provide him with the information he has requested.
Musk intended to use this data to evaluate the number of spam and fake, or bot, accounts on the platform. The prospective Twitter owner has stated these accounts’ removal would be one of his priorities if he buys the social media site.
Musk claims that Twitter’s failure to provide him with that information is a “clear material breach” of the merger agreement between them.
The owner of 9.6% of Twitter stock first announced on April 25 that he was buying the company. His $44 billion takeover offer would pay current stockholders $54.20 per share.
Musk halted the consummation of the deal, however, when he wrote letters to Twitter’s Chief Legal Officer, Vijaya Gadde. The letters — and subsequent Twitter posts like this one on May 13 — stated that the pending deal was on hold because of the bot and spam calculation issues.
Twitter has claimed that roughly 5% of its accounts could be classified as bots. But Musk specifically wants access to the metrics used by Twitter to determine the total number of these accounts.
He believes the company’s methodologies are faulty and alleges the true amount could be as high as 90%.
The social media giant responded to Musk’s letter by insisting that the company had provided him with the appropriate information. Twitter also indicated it intends to enforce the agreement and has no plans to reduce the final sale price.
Before it gets the chance, however, Twitter may have to defend its regulatory practices in a Texas court.
Attorney General Ken Paxton announced on Monday the launch of an investigation into whether Twitter was performing “false reporting over its fake bot accounts,” a potential violation of state law.
If Twitter is found to be violating Texas law or breaching the legal obligations of its agreement with Musk, the billionaire could potentially exit the deal without having to pay the breakup fee of $1 billion.
Some of Musk’s critics charge that his actions are an attempt to back out of the deal or reduce the amount paid.
Proprietary trader Dennis Dick of Bright Trading LLC used the term “buyer’s remorse” to describe Musk’s actions, citing recent price drops for social media stocks.
When Musk’s deal was first announced, Twitter’s stock price was just over $51. By May 24, it had dropped below $36 and was just above $40 at the closing bell on Tuesday.
Musk is considered the world’s richest person, with a reported worth of $219 billion. However, his overall net worth has declined since the deal with Twitter was announced.
The stock price of Musk’s electric vehicle company has dipped, for example. Tesla had a high price of $1,008 per share on April 25 but was $716.66 at Tuesday’s market close.
Based on his apparent net worth, Musk could conceivably fund the purchase by himself. Nevertheless, he has invited other investors, including venture capital firm Sequoia Capital and Prince Alwaleed bin Talal of Saudi Arabia.
If Musk perseveres in his quest to back out of the deal and refuses to pay the breakup fee, Twitter is expected to vigorously contest the conflict in court.