He Loves Twitter, He Loves Twitter Not

The Elon Musk/Twitter merger is off-again.

Photo by Hasan Almasi on Unsplash.

“We refer to (i) the Agreement and Plan of Merger by and among X Holdings II, Inc. dated as of April 25, 2022 (the “Merger Agreement”) and (ii) our letter to you dated as of June 6, 2022 (the “June 6 Letter”),” wrote Elon Musk’s attorneys in a letter sent to Twitter, Inc. on July 8, 2022.

“As further described below, Mr. Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect (as that term is defined in the Merger Agreement).”

And with that, the acquisition of Twitter by Tesla billionaire Elon Musk, in equal parts panned and anticipated, is officially off-again.

“While Section 6.4 of the Merger Agreement requires Twitter to provide Mr. Musk and his advisors all data and information that Mr. Musk requests ‘for any reasonable business purpose related to the consummation of the transaction,’ Twitter has not complied with its contractural obligations,” is likely to be the death knell of the blockbuster deal, at least in the near future.

Musk and Twitter, it seems, remain at the same impasse they were two months ago: Musk wants to buy Twitter, but is concerned Twitter’s user base contains more fake accounts than the social media giant is willing to admit; Twitter swears less than 5% of its users are fakes. Musk refuses to take Twitter’s word for it; Twitter refuses to let Musk independently verify the data.

Back and forth, back and forth.

It isn’t hard to understand Musk’s position, or Twitter’s either: Money.

If Musk pays too much for Twitter and is left holding the bag when the fake Twitter users are drained out of it, he loses. If Twitter is caught fudging fake user numbers, Twitter board members and stockholders will be left holding the bag when the fake users drain the value out of it. (If there really are less than 5% fake accounts on Twitter, no one loses.)

A similar impasse might result from an attempt to purchase a hotdog stand.