- Twitter has sued Elon Musk after the entrepreneur bailed on his deal for the company
- The social media platform claims Musk pulled out because of issues surrounding the financing
- Musk claims the number of bots on the platform caused him to renege
Twitter has sued Elong Musk after the entrepreneur pulled out of a deal to buy the company, citing concerns over the number of spam accounts on the platform. Twitter claims that Musk terminated the deal after agreeing the purchase, which had a huge impact on its share price, and wants to force the deal through. Musk faces either having to buy the company or pay a $1 billion divorce fee if he loses.
Musk vs Bots
Musk’s attempt to buy Twitter was initially refused then accepted by the board in April, since when Musk’s legal team has been doing due diligence on the platform. It soon emerged that Musk was concerned over the number of fake accounts and bots, something he had already promised to change, and even pronounced in May that as much as 20% of the accounts on Twitter were fake.
Twitter disagreed, saying the figure stood at less than 5%, but this only led to Musk putting the deal on hold shortly afterwards while he tried to verify that figure. Two months later he pulled out, suggesting that the disparity in the spam bot figures was insurmountable.
Twitter, however, says otherwise, claiming in its filing that the market downturn since the deal was agreed has left Musk short of funds and wanting to pay less than the agreed price:
Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter’s stockholders.
Courts Have Never Ruled on Such a Case of This Magnitude
Tesla stock has dropped 30% since the deal was agreed in April, directly impacting Musk’s ability to raise funds for the purchase, and Twitter suggests this is the sole reason for his pulling out of the deal.
U.S. courts have never dealt with a similar problem as large in scale as this, and so if things do get as far as legal battle, it will be interesting to see if a court can force Musk to buy Twitter for the agreed price. However, the likelihood is that this will be quickly, and quietly, settled out of court, although with Twitter now knowingly for sale it could encourage others to make a bid for the platform.
Musk is already facing a $258 billion lawsuit over his shilling of Dogecoin, which has left many investors out of pocket.