Musk Says Whistle-Blower Deal Lets Him Drop Twitter Purchase

(Bloomberg) — Elon Musk told Twitter Inc. that a $7 million severance payment to a whistle-blower who raised questions about problems at the company gives him another reason to walk away from his $44 billion purchase of the social media platform.

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Musk is trying to terminate his acquisition of Twitter after claiming the platform misled him and investors about the number of spam and bot accounts among its more than 230 million users. Twitter counters that Musk’s bot concerns are a pretext to get out of a deal in which the world’s richest person allegedly developed buyer’s remorse.

Musk’s lawyers, in a filing Friday, said as part of the purchase deal, Twitter needed to notify the billionaire before it spent $7.75 million in a separation agreement on June 28 with Peiter Zatko, the company’s former security chief. Musk’s lawyers said they learned of Zatko’s agreement Sept. 3 when Twitter filed paperwork in court. Zatko is scheduled to testify before a US Senate committee next week on his concerns about lax security, privacy issues and the number of bots on the platform. He has been subpoenaed to testify in the Twitter lawsuit, as well.

Both sides are gearing up for an October trial of Twitter’s lawsuit to force Musk to consummate the deal. Delaware Chancery Judge Kathaleen St. Jude McCormick on Wednesday approved Musk’s request to add Zatko’s allegations to his counterclaims. But she denied his bid to delay the trial.

Twitter representatives didn’t immediately respond to an emailed request for comment.

It’s the third time Musk has told Twitter officials he’s withdrawing his $54.20-per-share bid for the platform because of violations of the buyout agreement covering the transactions.

“This severance payment violated” the requirement that Twitter executives run the company “in the ordinary course of business” while the legal dispute over Musk’s efforts to torpedo the deal are hashed out.

The case is Twitter v. Musk, 22-0613, Delaware Chancery Court (Wilmington).