• by Karlene Lukovitz  @KLmarketdaily, June 7, 2022

Elon Musk is again threatening to pull out of his $44-billion deal to acquire Twitter, based on his claim that Twitter is “actively resisting and thwarting his information rights (and the company’s corresponding obligations) under the merger agreement.”

The assertion was included in a June 6 letter to Twitter from Musk’s lawyers that was included in a filing on Monday with the Securities and Exchange Commission.

The letter states that 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.”

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,” it charges. “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.”

Twitter’s response constitutes “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 concludes.

Musk agreed to acquire Twitter in April, but on May 13, tweeted that he was putting the deal “on hold” pending details supporting Twitter’s estimate that spam and fake accounts represent less than 5% of its active users. He later added that he was “still committed to the acquisition,” but subsequently asserted, without providing evidence, that Twitter’s fake accounts could be 20% or “much higher.”

In response, Twitter has pointed out that it has long publicly stated that 5% estimate, that Musk specifically declined to engage in more due diligence during the negotiations, and that Twitter does not believe that an analysis of the accounts can be conducted externally, since it would require private information it cannot share.

Twitter’s stock price has gone up and down in reaction to Musk’s tweets. After news of the threatening letter broke yesterday, the price fell 5%, to about $38 — well below the $54.20 price Musk agreed to pay for the company.

It has been widely speculated that Musk is trying to use the fake account data objection to reduce the price, and some of his own statements seem to imply he believes that a lower price may be warranted.

Since the deal was announced, Musk has sold at least $8.5 billion of his shares in his car company Tesla, with concerns that his Twitter acquisition may force him to sell more shares and/or distract his attention had hurt Tesla’s shares.

On Friday, Tesla’s stock dropped 9% after it was revealed that Musk had stated that Tesla would cut its salaried head count by 10%, but increase its hourly head count. On Saturday, he appeared to backtrack, tweeting that “total head count will increase, but salaried should be fairly flat.”

As of mid-May, Musk had also pulled in 18 investors for the Twitter deal, representing a combined $7 billion, allowing Musk to reduce his loan for the deal from $12.5 billion to $6.5 billion.