Elon Musk threatens to terminate $44bn Twitter takeover: Here's why
What's the story
Elon Musk has threatened to walk away from his Twitter takeover bid worth $44 billion. Musk has accused the social media giant of "thwarting" his requests to give him information about its fake accounts and spam bots. Tesla's top boss wants to evaluate how many of the firm's 229 million accounts are fake. Meanwhile, Twitter has defended its estimates of fewer than 5%.
Context
Why does this story matter?
The chaotic Twitter takeover is unfolding itself in the most unexpected ways. Musk has been fixated with the bot issue for a long time and believes that Twitter's calculation of fake accounts in not accurate. He has already put the deal on hold. As a result, Twitter's share prices are declining. They are down more than 20% in the last month.
Claim
Musk claims that more than 20% Twitter accounts are fake
Twitter CEO Parag Agrawal has estimated that fake accounts account for less than 5% of daily active users. However, Musk believes the figure to be 20% or more. In a filing with the US Securities and Exchange Commission, Musk's lawyers claimed that he had asked Twitter for the required evaluation information of fake accounts from May 9 onward but hasn't received anything credible.
Penalty
Musk might have to pay a $1 billion breakup fee
Musk can back out from the Twitter takeover if there is a "material adverse effect" caused by the firm, i.e. a change that negatively impacts Twitter's financial conditions. Twitter is proceeding with the deal but a shareholder vote is yet to be done. If Musk tries to walk away, he may have to pay a $1 billion breakup fee or face a lawsuit.
Stand
'Musk has power to terminate merger agreement'
In the letter to SEC, Musk's lawyer Mike Ringler said, "As Twitter's prospective owner, Mr. Musk is entitled to the requested data to enable him to prepare for transitioning Twitter's business to his ownership and to facilitate his transaction financing." He added that Twitter is resisting Musk's information rights and this gives him power "not to consummate the transaction and terminate the merger agreement."