Elon Musk Likely Will Be In Court Soon With Twitter

Elon Musk filed another 13D form with the Securities and Exchange Commission today (July 8) stating that he delivered a letter to Vijaya Gadde, TwitterTWTR
Inc.’s Chief Legal Officer, stating that Musk is terminating the merger.

This is due to the fact that Twitter, Musk claims, is in material breach of multiple provisions of the merger agreement and that they appear to have made false and misleading representations upon which Musk relied upon when entering into the agreement, and is likely to suffer a Company Material Adverse Effect.

Those there are fighting words! It seems very unlikely that Twitter management is going to put their tail between their legs and go down without a fight. The 13D further says that Musk has sought the data and information necessary to make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform.

The filing further states that “any cure period afforded to Twitter under the merger agreement has now lapsed,” slamming the door shut on offering to negotiate changes to the merger agreement. To many, the 13D filing will likely be viewed as Musk’s attempt to wiggle out of what is now seen as a very over-priced offer, given the recent downturn in technology stocks.

However, Twitter just held a media call on Thursday saying that spam bots are less than 5% of their accounts despite Musk believing it is much higher. The company then went into quite a bit of detail about how it calculates the bots using human review of thousand of accounts chosen at random each quarter.

It also uses IP addresses and phone numbers to determine whether or not the accounts are ran by real people. Management then said it’s impossible to estimate bots accurately without personal data like the phone numbers and IP addresses that it looks at when doing their own analysis. This implies that any estimates that Musk is coming up with are very inaccurate. The next move is likely to be a lawsuit by Twitter against Musk to enforce the merger.

Twitter Chairman Bret Taylor tweeted shortly after the 13D was filed that the board plans legal action to enforce deal at the price and terms already agreed upon. “We are confident we will prevail in the Delaware Court of Chancery,” Mr. Taylor tweeted.