Tesla CEO Elon Musk’s $44 billion takeover of Twitter is in “serious jeopardy,” according to people familiar with the matter.
Musk’s team concluded that Twitter could not verify the number of its spam accounts, which has been a major complaint of Musk, according to people familiar with the matter. Musk’s camp has reportedly “stopped participating” in discussions to fund the deal. To raise the funds needed to buy Twitter, Musk has also brought in investors including Oracle founder Larry Ellison and the venture firm Andreessen Horowitz.
As recently as Thursday, Twitter executives insisted that its fake email accounts accounted for less than 5% of its total users. Twitter executives say the company deletes more than 1 million spam accounts every day. But Musk believes the number of bot accounts on Twitter is well above 5% and threatens to pull out of the deal.
Twitter shares closed down 4% on Thursday. A Twitter spokesperson said the company “has and will continue to work with Musk to share information to complete the transaction in accordance with the terms of the merger agreement.” “We believe this agreement is in the best interests of all shareholders. We intend to complete the transaction and execute the merger agreement on the agreed price and terms,” the spokesman said.
Just about a month ago, Twitter provided Musk’s team with a trove of data to back up claims that its bots account for less than 5 percent of its daily active users. Before that, Musk tweeted that he was “pausing” the deal. Musk’s lawyers sent a letter claiming that Twitter was in “obvious and material breach” of the acquisition agreement by denying him access to the data.
According to the original agreement between the two parties, the defaulting party needs to pay $1 billion in damages to the other party. But exactly who defaulted and whether Musk was allowed to back out of the deal could spark a lengthy legal battle. Twitter has said it is willing to go to court to ask Musk to stick with the deal.