Musk can’t blame bots to get out of the Twitter deal

Elon Musk doesn’t want to own a company with a spam bot problem. And now, he’s claiming that he has the right to bail on his Twitter takeover because the company won’t give him the data he wants on the issue, according to a Securities and Exchange Commission filing.

But finance and securities law experts said the claim won’t actually get him out of the Twitter deal — and may set him up for a legal battle.

Musk claims Twitter denied him information about the number of spam bots on the platform, which would violate the terms of the merger agreement that entitles him to information for “any reasonable business purpose related to the consummation of the transaction.” His letter states that Twitter needs to give Musk data about Twitter’s bot and spam accounts so he can conduct his own analysis of the issue.

“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,” the letter, signed by Skadden attorney Mike Ringler, states. “To do both, he must have a complete and accurate understanding of the very core of Twitter’s business model — its active user base.”

Now, Twitter has 30 days to cure breach, meaning the company can give Musk the information he’s requesting about spam bots. But experts said no matter what, Musk’s letter won’t actually get him out of the deal.

“Musk does not have any ground to stand on to void the agreement that he signed,” David Kass, a finance professor at University of Maryland’s business school, told Protocol.

Kass said Musk has two ways out of the acquisition: One would be a regulatory holdup, which doesn’t look likely now that the FTC’s window to intervene has closed. The other would be if Musk doesn’t gather enough debt funding for the deal to happen, in which case he’d pay Twitter $1 billion and break up with the company once and for all.

So if the letter won’t help him end the deal, Musk could be setting himself up for a court battle, in which case Musk could try to lower the price of the deal, according to Adam Pritchard, a securities law professor at University of Michigan’s law school. Tech stocks overall have plunged, and Musk has likely realized that $44 billion is a lot more than Twitter is actually worth right now.

“It’s not like the understanding of the business has changed,” Pritchard told Protocol. “It’s just that stock market valuations have gone south and he’s just paying way too much for this company now.”

Musk is digging himself into a hole. It would take a lot to get Twitter to lower the price of the deal, and it’s already reiterated that his new letter won’t change anything.

“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,” the company said in a statement Monday. “We intend to close the transaction and enforce the merger agreement at the agreed price and terms.”