SAN FRANCISCO – Elon Musk’s attorneys said he might walk away from the deal to buy Twitter, due to a dispute with the company over the number fake accounts.
The latest twist in Musk’s $44-billion-dollar attempt to buy Twitter came in the form of a letter from Musk’s lawyers that was filed Monday with the U.S. Securities and Exchange Commission.
Musk’s attorneys accused Twitter of withholding data from Musk, as to how many of the 229 million Twitter accounts are fake or so-called bots.
Twitter’s CEO said the number of fake accounts is less than 5%, a number Musk has questioned.
In the letter from Musk’s attorneys, they state “This is a clear material breach of Twitter’s obligations,” and add that Musk reserves “his right to terminate the merger agreement.”
“He appears to be using this as leverage in order to renegotiate the deal,” said Steve Diamond, a corporate law expert and associate professor at Santa Clara University School of Law.
“It’s not entirely clear that they do have a right to more information about this,” said Diamond, adding that Musk agreed to pay $54.20 a share without a close analysis of the data before signing the deal.
“I think the board is well within its rights under the agreement to just say no, you agreed to $54.20, you had your chance to kick the tires, you only kicked them once, not twice, and you now need to pay and close on the deal,” said Diamond.
Following the news, Twitter’s stock price dropped about 1.5% Monday. A group of Twitter shareholders filed a lawsuit against Musk last month accusing him of driving stock prices down more than 20%.
Some wonder about Musk’s power to impact stock prices with a simple tweet.
“I think he’s trying to manipulate the stock market just like he did with crypto,” said Flora Tong of Fremont.
“There’s been some SEC problems in the past before where he’s been accused of manipulating the stock price of Tesla,” said Ben Knight of San Francisco.
“The Securities and Exchange Commission, which is the federal regulator for the securities markets, has paid close attention to the potential effect that Tweets can have on stock prices,” said Diamond, noting that Musk is still under a federal court order after his tweet several years ago about a potential buyout of Tesla.
Diamond says the Twitter Board does have some options if they don’t want to re-negotiate with Musk.
“The next card for the board at Twitter to play, is a court order to say you have to follow through on the deal Elon, that’s what you negotiated,” said Diamond.
Musk could face penalties of up to $1-billion if he backs down from the deal.
Jana Katsuyama is a reporter for KTVU. Email Jana at [email protected] and follow her on Twitter @JanaKTVU or Facebook @NewsJana or ktvu.com.