Elon Musk files letter to terminate $44bn Twitter deal

In April, the world’s richest person agreed to acquire the microblogging platform but then began to air doubts about the number of its spam accounts

Elon Musk's lawyers say allegations made by Twitter's former security chief justify the move to cancel the $44 billion buyout deal. Reuters
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Billionaire businessman Elon Musk’s lawyers have confirmed that they sent a letter to Twitter on Monday to formally terminate a $44 billion merger agreement, after he subpoenaed a whistleblower for documents on how the platform measures spam accounts, the US Securities and Exchange Commission said on Tuesday.

“The reporting person’s [Elon Musk's] advisers sent a letter to Twitter formally notifying … that the reporting person is terminating their merger agreement for additional bases separate and distinct from those bases set forth in the reporting person’s July 8 letter to Twitter terminating their merger agreement,” the regulatory filing said.

“Although the reporting person believes the [latest] termination letter is not legally necessary to terminate the merger agreement because he has already validly terminated it pursuant to the July 8 termination letter, the reporting person delivered the August 29 termination letter in the event that the July 8 termination letter is determined to be invalid for any reason.”

In an August 29 letter to Twitter's legal chief that was filed with the SEC, Mr Musk's lawyer Mike Ringler, from Skadden, Arps, Slate, Meagher & Flom, said allegations made by the microblogging platform's former head of security Peiter Zatko, related to certain facts known to Twitter before July 8 that were not disclosed and as a result breached the merger agreement and served as a "bases" to end the deal.

Mr Zatko alleged that Twitter was in material non-compliance with legal data privacy obligations, fair trade practice and consumer protection laws and regulations, Mr Musk's lawyer said in the SEC filing, citing Mr Zatko's whistleblower report to various US government entities that was published by The Washington Post.

He also alleged that the platform was “vulnerable to systemic disruption resulting from data centre failures or malicious actors, a fact which Twitter leadership [including its chief executive] have ignored and sought to obfuscate”.

Mr Zatko also alleged that Twitter’s platform was built “in significant part on the misappropriation and infringement of third-party intellectual property”, and that the social media company agreed to a request by a foreign government to allow its agents be hired by the platform and given access to user information, according to the filing.

Twitter was trading 1.35 per cent lower at $39.50 a share in pre-market trading on Tuesday, while Tesla was 6.46 per cent higher at $291.30 a share.

Mr Musk, the world’s richest person, agreed earlier this year to acquire Twitter in a $44 billion deal, pledging to pay $54.20 a share.

Upon completion of the proposed deal, Twitter was to be converted into a private company.

Mr Musk had said he wanted to introduce new features and make algorithms open source to increase trust, “defeat the spam bots, and authenticating all humans”.

However, the deal faced various headwinds. On July 8, Mr Musk filed paperwork to terminate the transaction, claiming Twitter did not address inquiries on its “spam” or bot accounts, or provide him with relevant business information.

Twitter chief executive Parag Agrawal hit back at Mr Musk's concerns and said spam accounts accounted for less 5 per cent of users.

The microblogging platform locks millions of accounts each week that it suspects could be fake, he said.

On July 12, Twitter filed a legal challenge against Mr Musk for breaching the agreement.

Both sides are preparing for a courtroom showdown, which is set to start on October 17 in Wilmington, Delaware.

Lawyers for both Twitter and Mr Musk have issued a flurry of subpoenas to banks, investors and lawyers involved in the deal.

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Updated: August 30, 2022, 1:35 PM
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