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Elon Musk threatens to terminate Twitter agreement without information about spam accounts

Mr. Musk, who signed a deal to buy Twitter in April, has in recent weeks threatened to put the deal “on hold” due to the number of fake accounts. Last month, he tweeted that “the agreement can not go ahead” before Twitter shows “evidence” that these accounts make up less than 5 percent of users, as Twitter has repeatedly said. He made similar comments at a conference in Miami, and indicated that he may be trying to lay the groundwork for recasting the agreement.

In doing so, it appeared that Musk was in the process of building a case to argue that Twitter had experienced a “significant negative change”[ads1];, or a change that would significantly affect the business, which could allow him to break the agreement. . Legal experts have questioned the benefits of this argument, especially since Twitter has long revealed that fake accounts represent about 5 percent of users. However, Mr. Musk’s letter on Monday represented a new strategy.

“What he’s actually doing is a much smarter attempt to get out of the merger agreement,” said Ann Lipton, a professor of corporate governance at Tulane Law School. “If Twitter really shut down requests for information, and those requests for information were necessary or reasonable for Musk to receive his funding – which is what he claims in this letter – then it would be a breach that allows Musk to walk away. ”

Twitter, for its part, can claim that they do not have the information that Musk requires, or that it is not necessary for the agreement to terminate, she said.

“The merger agreement provides information, with the exception, but that does not mean he can get the information he wants,” said Edward Rock, a professor of corporate governance at the New York University School of Law. “What I do not know is what information he is asking for.”

An agreement is expected to be concluded by 24 October. If it does not end by then, both sides can go away. If the transaction is delayed by regulatory approvals at that time, Mr. Musk and Twitter will have another six months to close it.

Last week, Twitter announced that it had received regulatory approval from the Federal Trade Commission to continue with the agreement. Last month, Musk revealed in an archive that he had raised his personal cash obligation to the agreement, and canceled a planned loan against shares in Tesla. Musk said he was in talks with other Twitter shareholders, including the company’s co-founder and former CEO, Jack Dorsey, about rolling their existing shares into the company after it was taken privately, instead of selling its holdings as part of the company. deal.

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