A new letter from Elon Musk’s attorney says Twitter’s refusal to come clean about the number of fake accounts on its platform could put Musk’s purchase of the social media giant in jeopardy.
The Security and Exchange Commission filing is part of a long-running battle between Twitter, which has said fake accounts make up less than 5 percent of its overall accounts, and Musk, who says the number is much higher and has thrown around a figure of 20 percent.
“Twitter has, in fact, refused to provide the information that Mr. Musk has repeatedly requested since May 9, 2022 to facilitate his evaluation of spam and fake accounts on the company’s platform,” Musk’s attorney, Mike Ringler, said in the letter to Vijaya Gadde, chief legal officer of Twitter, dated Monday.
“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.
“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.”
BREAKING NOW: Elon Musk threatens to ABANDON $44-billion Twitter deal as he slams the social media giant for 'resisting and thwarting' his right to details on 'spam and fake accounts'…
— Chuck Callesto (@ChuckCallesto) June 6, 2022
The letter said that if the company will not live up to the terms of the deal, Musk is free to walk away from it.
“As noted, under various terms of the merger agreement, Twitter is required to provide data and information that Mr. Musk requests in connection with the consummation of the transaction. Twitter’s obligations to provide Mr. Musk with information is not, as the company’s June 1 letter suggests, limited to a ‘very specific purpose: facilitating the closing of the transaction,’” the letter said.
“As Twitter’s prospective owner, Mr. Musk is clearly entitled to the requested data to enable him to prepare for transitioning Twitter’s business to his ownership and to facilitate his transaction financing. To do both, he must have a complete and accurate understanding of the very core of Twitter’s business model — its active user base,” the letter said.
The letter said Twitter was trying to hide unpleasant facts.
“In any event, Mr. Musk is not required to explain his rationale for requesting the data, nor submit to the new conditions the company has attempted to impose on his contractual right to the requested data. At this point, Mr. Musk believes Twitter is transparently refusing to comply with its obligations under the merger agreement, which is causing further suspicion that the company is withholding the requested data due to concern for what Mr. Musk’s own analysis of that data will uncover,” the letter said.
Twitter CEO Parag Agrawal has said sharing information with Musk has its limits due to privacy concerns, according to Bloomberg.
“Unfortunately, we don’t believe that this specific estimation can be performed externally, given the critical need to use both public and private information,” Agrawal wrote last month.
The letter said Twitter should have no qualms about giving Musk what he wants, noting the billionaire has said he will respect privacy concerns.
“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 letter said.
Then came the hammer.
“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 said.
“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,” the letter said.
Twitter’s stock dipped 5 percent Monday morning, CNBC noted.
The Tesla and SpaceX CEO announced on May 13 that the deal was “temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.”
To find out, my team will do a random sample of 100 followers of @twitter.
I invite others to repeat the same process and see what they discover …
— Elon Musk (@elonmusk) May 14, 2022
Twitter had said in a quarterly filing on May 2 that its “estimation of false or spam accounts may not accurately represent the actual number.”
If a significant amount of Twitter’s user base is fake, that could drastically affect the value of the company. Without an accurate tally of spam accounts, Musk tweeted on May 16, “how do advertisers know what they’re getting for their money? This is fundamental to the financial health of Twitter.”