Musk calls Twitter 'serious breach', threatens to tear up acquisition deal

According to foreign media reports, Musk warned Twitter on June 6 that he may walk away from a deal to acquire the company if Twitter cannot provide the data he requested for spam and fake accounts.Musk accused Twitter of a "serious breach" of its agreement obligations.

This isn't the first time Musk has said publicly that he may abandon plans to buy Twitter.But the warning from Musk's lawyers in a letter to Twitter's chief legal officer Vijaya Gadde marked an escalation.

In the letter, Musk's lawyers reiterated Musk's request for bot account details and said he reserved all rights to terminate the acquisition because the company had "serious breach" of its obligations by not providing him with information.

Twitter responded by saying it planned to force the deal to close in accordance with the terms of the agreement."Twitter has and will continue to share information with Musk to complete the transaction in accordance with the terms of the merger agreement," the company said in a statement.

Image credit: Musk

Musk, a self-described absolute defender of free speech, has said one of his top priorities will be to weed out "spam bots" from the Twitter platform.He had tweeted that the deal to buy Twitter was "on hold" in mid-May and said he would not move forward with the acquisition until Twitter proved that spam accounts made up less than 5 percent of its total users. .Musk believes that spam accounts account for at least 20% of total users.

In the letter, Musk said he needed the data to conduct his own analysis of Twitter users because he didn't believe in Twitter's "lax approach to testing."Twitter stands by its ownpredictionsand cannot provide proprietary information about how it generated them.

Wedbush analyst Dan Ives believes that "Musk is trying to walk away from the Twitter deal, and this is his first shot."

Legal experts say the disclaimer that Twitter uses when predicting spam accounts gives it some protection from potential lawsuits.Even if Twitter's predictions were skewed, Musk would have to prove that Twitter tried to intentionally mislead, but that's a high legal bar.

"Musk is trying to get his hands dirty, and he may succeed," said Dennis Dick, a trader at Bright Trading LLC.

To be sure, even if the law were on Twitter's side, Musk could walk away or renegotiate the deal.Because any lawsuit is likely to be protracted, Twitter may think it more reasonable to agree to a lower price or get compensation from Musk than to try to force him to complete a deal in court.

If Musk can't close the deal because his debt financing fails or regulators block him, he will pay a $1 billion "break-up fee" as he is contractually obligated, but Forbes considers that to be only part of his fortune ($219 billion) a small part.

Image source: Twitter

On June 6, Texas Attorney General Ken Paxton announced that he had opened an investigation into Twitter, which he believed "may have submitted a false report on its fake bot account data" that may have violated the state's law.Paxton asked Twitter to hand over documents for investigation."It is my duty to protect Texans if Twitter raises revenue by misrepresenting fake accounts," Paxton said in a statement.

But a Twitter spokesman said the company stood by its filings with the Securities and Exchange Commission (SEC).

On June 6, Twitter shares fell 1.5% to close at $39.57, well below the takeover offer of $54.2.Investors think Musk will either persuade Twitter to agree to a lower price or walk away from the deal.