Highlights:

  • Musk’s legal team has claimed that the social media platform appears to have made false and misleading claims when he agreed to buy the business on April 25 and had breached numerous terms of the original deal.
  • According to a “particular performance clause” in the merger agreement, Twitter has the right to sue Musk to compel him to complete the deal as long as he still has the debt financing in place.

Billionaire Elon Musk recently moved to withdraw his USD 44 billion proposal to purchase Twitter owing to disagreements over the number of spam accounts on the platform.

Musk may wish to withdraw his bid for Twitter, but merger agreements are difficult to break, and thus far, Musk hasn’t shown enough evidence to support his assertions that Twitter misled about its spam statistics. Bret Taylor, the chairman of Twitter, has already made it clear that Musk will face legal action from the Twitter board.

In order to sue the Tesla CEO, Twitter has hired a prestigious legal company. According to sources who refused to be identified due to the private nature of the matter, a lawsuit against the corporation will be handled by Wachtell, Lipton, Rosen and amp; Katz LLP.

Musk Twitter fall out over spam accounts

In a letter to Twitter, the Tesla CEO’s legal team said that the social media platform appears to have made false and misleading claims when Musk agreed to buy the business on April 25 and had breached numerous terms of the original deal.

Musk formally agreed to buy Twitter in April for USD 54.20 per share. According to the agreement, if the arrangement were to be terminated, either party would be obligated to pay a USD 1 billion breakup fee.

Shortly after the acquisition was finalized, Musk implied that he was reconsidering it. In May, Musk stated that he had decided to put his decision to purchase Twitter “on hold” as he had evaluated the company’s assertions that 5% of its monetizable daily active users (mDAUs) are spam accounts. According to Twitter, it has been communicating with Musk and has even given him access to its “firehose,” or the daily stream of tweets that pass through the service.

During a call with executives to discuss the company’s bogus and bot accounts, Twitter stated that it removes one million spam accounts daily. During the call, Twitter stated that spam accounts make for significantly less than 5% of its active user base each quarter. IP addresses, phone numbers, and locations are examples of private data that isn’t accessible to the general public and isn’t included in the data “firehose” provided to Musk. According to Twitter, this sensitive information helps prevent falsely labeling actual accounts as spam.

What’s next

Twitter appears to have the upper hand as the transaction drama moves to court. According to a “particular performance clause” in the merger agreement, Twitter has the right to sue Musk to compel him to complete the deal as long as he still has the debt financing in place.

In the upcoming days, it’s expected that Twitter will file a lawsuit in Delaware, asking the court to determine if it broke the terms of the agreement before ordering Musk to fulfil his commitments and finalize the merger. After that, both parties are expected to continue making their arguments in court as part of a litigation process that could take a year or more to play out.