Elon Musk Threatens to Walk Away from Twitter Deal Over ‘Material Breach’

In an SEC filing released on Monday, Elon Musk’s lawyers said that Twitter is in “material breach” of its $44 billion USD acquisition deal with the billionaire — reports Yahoo Finance.

According to the filing, the social media company has withheld data on its user base. Specifically, Musk hasn’t been given access to information he requires to verify Twitter’s claims of how many spam and fake accounts are part of the platform’s monetizable daily active users (mDAUs).

“Based on Twitter’s behavior to date, and the company’s latest correspondence in particular, Mr. Musk believes the company is actively resisting and thwarting his information rights (and the company’s corresponding obligations) under the merger agreement,” the letter from Musk’s counsel reads.

“This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement.”

Twitter said in a previous filing that bot accounts, by its calculations, accounted for under 5% of its mDAUs during the first quarter of this year.

Musk, however, estimates that number is closer to 20% (and could even be higher). The Tesla CEO has publicly raised concerns, saying last month that the acquisition was “temporarily on hold” pending verification of Twitter’s fake/spam account numbers.

Musk assured that he was “still committed” to buying Twitter, but he later said that the deal “cannot move forward” until the social media giant offers up evidence supporting its bot estimates. The proposed acquisition cleared its 30-day waiting period for objections from U.S. antitrust regulators last week.

Musk also takes issue with how Twitter calculates how many spam and fake accounts are active on its platform, calling the company’s methods “very suspicious.”

The billionaire’s legal team alleges that Twitter has refused to provide access to information that could facilitate an independent assessment of bot accounts, noting that Musk requested data from the company in letters sent on May 25 and May 31.

“Twitter’s latest offer to simply provide additional details regarding the company’s own testing methodologies, whether through written materials or verbal explanations, is tantamount to refusing Mr. Musk’s data requests,” the SEC filing reads.

“Twitter’s effort to characterize it otherwise is merely an attempt to obfuscate and confuse the issue. Mr. Musk has made it clear that he does not believe the company’s lax testing methodologies are adequate so he must conduct his own analysis. The data he has requested is necessary to do so.”

Musk’s lawyers added that if Twitter “is confident in its publicized spam estimates, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to independently evaluate those estimates.”

The Tesla CEO is liable to pay a $1 billion fee if the acquisition falls through. However, a material breach of contract on Twitter’s part could nullify that fine.

Twitter stock has plunged more than 17% since Musk announced his offer to buy the company at $54.20 per share back in April.