Suggesting that Twitter is misleading the public regarding the amount of spam and fake accounts on its platform, potential buyer Elon Musk gave notice on Friday that he is terminating his merger agreement with the social media company.
“Mr. Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect (as that term is defined in the Merger Agreement),” states a letter from Musk legal representative Mike Ringler to Twitter Chief Legal Officer Vijaya Gadde, which was filed with the SEC.
“While Section 6.4 of the Merger Agreement requires Twitter to provide Mr. Musk and his advisors all data and information that Mr. Musk requests ‘for any reasonable business purpose related to the consummation of the transaction,’ Twitter has not complied with its contractual obligations,” continues the notice. The letter goes on to accuse Twitter of failing or refusing to provide information, and of claiming to be in compliance while actually “giving Mr. Musk incomplete or unusable information.”
The notice also makes the strong accusation that “all indications suggest that several of Twitter’s public disclosures regarding its mDAUs [monetizable daily active users] are either false or materially misleading.”
So was Musk’s offer a gambit all along, aimed at forcing Twitter to expose its false accounting and overvaluation? Was it intended to give Musk some sort of crediility to denounce Twitter’s value or business practices? Or was it it a legitimate offer that forced Twitter into the position of concealing its allegedly cooked books? Did the Twitter board pretend to accept Musk’s deal to avoid the consequences of not pursuing shareholders’ best interests while never intending to comply with the terms? The inevitable lawsuits will be vast and complex, and it may be years — if ever — before the answers are known.
“As Twitter has been on notice of its breach since at least June 6, 2022, any cure period afforded to Twitter under the Merger Agreement has now lapsed,” concludes the notice. “Accordingly, Mr. Musk hereby exercises X Holdings I, Inc.’s right to terminate the Merger Agreement and abandon the transaction contemplated thereby, and this letter constitutes formal notice of X Holding I, Inc.’s termination of the Merger Agreement pursuant to Section 8.1(d)(i) thereof.”
And with those words, the dreams of free speech advocates the world over are dashed.