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Will Elon Musk Buy the Company or Will He Walk Away?


Tesla CEO Elon Musk has been indicating that he will drop the $44 billion Twitter deal over fake accounts issue, but all this was just a speculation until yesterday. According to several media reports, the billionaire has in a letter threatened to walk away from the takeover deal if the social media network failed to provide data on spam and fake accounts. Twitter was in a “clear material breach” of its obligations and that Musk reserves all rights to terminate the merger agreement, Musk said in a letter sent through his lawyer.

Musk’s latest warning to Twitter has put on a bigger question mark on the mega deal. While the Tesla CEO has clearly mentioned his stand in the letter as well as the microblogging site several times, here is what we know.

What Does Elon Musk’s Letter Say?

In the letter filed with regulators on Monday, Elon Musk said he was entitled to conduct his own survey of spam accounts, as he believes that there are more than 5 per cent of bot accounts on Twitter as reported by the microblogging site.

“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,” Musk’s lawyer Mike Ringler said in the letter.

“Based on Twitter’s behaviour to date, and the company’s latest correspondence in particular, Mr Musk believes the company is actively resisting and thwarting his information rights,” said the letter. “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,” it added.

What Twitter Has Said So Far

Twitter on Monday responded to Musk’s letter by saying that it would cooperatively share information with the Tesla CEO. “Twitter has and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement,” read the statement.

“We believe this agreement is in the best interest of all shareholders. We intend to close the transaction and enforce the merger agreement at the agreed price and terms,” it added. Closing of the transaction has always been highlighted by Twitter, as its current CEO Parag Agrawal had indicated earlier in a series of tweets, following Musk’s declaration of putting the deal on hold. “While I expect the deal to close, we need to be prepared for all scenarios and always do what’s right for Twitter. I’m accountable for leading and operating Twitter, and our job is to build a stronger Twitter every day,” he had said in the tweet in May 14.

Fake Accounts the Only Problem for Elon?

The dispute between Elon Musk and Twitter has strengthened doubts about the $44 billion takeover, which was announced in April this year. However, analysts have been saying that Musk is doing this to renegotiate the price of the deal, which will result in a hefty amount of spending from the Tesla CEO’s pocket. There is also an issue of interest payment against the $13 billion debt, which is looking more problematic over time. Meanwhile, Elon Musk will face a $1 billion lawsuit if he walks away from the deal, according to its provisions.

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