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Twitter got some devastating news on Friday.
Elon Musk’s attorneys sent a letter to Twitter informing the social media company that he was walking away from the deal.
Musk claimed the company had misrepresented the company and was in breach of the initial agreement on several fronts.
Time to Go
Personally, I don’t think Musk ever intended to buy the company.
I think he wanted to crush Twitter and he knew creating a deal and walking away would do just that.
After making the initial deal, Musk came at them right away about proving that less than five percent of the overall accounts were not spam and/or fake accounts.
I believe as part of his takedown of Twitter, he wanted to expose to the company’s advertisers that they were being had, which could open the door to lawsuits galore from past and present advertisers on Twitter.
When you advertise on Twitter, like Facebook, you are paying for reach, and if that reach is going to bots, well, Twitter, we have a problem.
Musk’s letter stated, “For nearly two months, Mr. Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform.’
“This information is fundamental to Twitter’s business and financial performance and is necessary to consummate the transactions contemplated by the Merger Agreement because it is needed to ensure Twitter’s satisfaction of the conditions to closing, to facilitate Mr. Musk’s financing and financial planning for the transaction, and to engage in transition planning for the business.
“Twitter has failed or refused to provide this information.
“Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information.”
Twitter responded…
The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.
— Bret Taylor (@btaylor) July 8, 2022
Twitter shares immediately started to collapse after the news broke, down by roughly five percent in after-hours trading.
Twitter’s 52-week high was $73.34 per share and it is now down to less than $37 per share.
I would expect a rather significant sell-off on Monday, as those who bought in expecting to make a windfall on Musk’s coattails will just bail and take their losses.
Regardless of how this works out with Musk, I would expect Twitter is in for a world of pain as more and more questions get asked about the fake and spam accounts on the platform.
Quite frankly, I am surprised this has not come up before, which would include on Facebook.
As the platform, it is its responsibility to ensure advertisers’ integrity, which is clearly not the case.
I do not see how this is not considered fraud on a very large scale.
