Elon Musk Accuses Twitter of ‘Material Breach’ of Agreement — Threatens to End $44B Deal

Tesla and Spacex CEO Elon Musk believes that Twitter is in material breach of the merger agreement with him, so he has the right to terminate the deal. The social media giant has refused to provide critical information relating to spam and fake accounts on its platform, Musk’s legal team explained.

In a letter sent to Twitter Inc. Monday, which was also filed with the U.S. Securities and Exchange Commission (SEC), Elon Musk’s legal team wrote:

Twitter has … 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.

“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,” Musk’s lawyer added.

The letter notes that Twitter is required to provide the data Musk asked for under the merger agreement. Musk’s legal team further argued that the requested data is necessary to form a complete and accurate understanding of Twitter’s active user base, which is “the very core of Twitter’s business model.”

The Tesla CEO suspects that Twitter’s refusal to comply with the merger agreement obligations could mean “the company is withholding the requested data due to concern for what Mr. Musk’s own analysis of that data will uncover,” the lawyer detailed.

Furthermore, the Spacex boss believes that Twitter is “actively resisting and thwarting his information rights … under the merger agreement,” the letter describes, adding:

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.

According to Twitter’s proxy statement in April, Musk rushed to give his “best and final” offer of $44 billion without carrying out any due diligence. “Mr. Musk did not ask to enter into a confidentiality agreement or seek from Twitter any non-public info regarding Twitter,” the social media company said in its proxy. Twitter has used this reason to refuse Musk’s request for data.

On Monday, a Twitter user explained that the social media giant can be liable for the omission of or misleading material facts. He clarified that waving due diligence does not mean you have to accept fraudulent disclosure, such as an understated number of spam bots.

Musk concurred, tweeting: “Correct.”





Musk has been complaining about spam bots on Twitter for quite some time. He called it the “single most annoying problem” on Twitter, promising to solve the problem if he is successful in taking over the platform. “If our Twitter bid succeeds, we will defeat the spam bots or die trying!” he affirmed. Since his offer was accepted by Twitter, Musk has been discussing how to solve the spam bot problem on the platform, including using the meme cryptocurrency dogecoin.

However, he announced last month that his Twitter buyout deal has now been put on hold, tweeting: “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” Musk believes that 20% or more of users are bogus.

According to the merger agreement, Musk will have to pay Twitter a $1 billion fee if he terminates his $44 billion cash deal for the social media company. However, this changes if Twitter is in breach of the agreement.

Wedbush analyst Dan Ives believes that Musk is looking to terminate the deal with the social media company. Noting that Twitter will fight the accusation, he tweeted Monday:

Our view: Musk looking to walk away from deal.

Do you think Twitter is hiding something? And, do you think Elon Musk should walk away from the deal? Let us know in the comments section below.