Tesla CEO Elon Musk has said that Twitter's legal team accused him of violating a nondisclosure agreement by revealing that the sample size for the social media platform's checks on automated users was 100.
Taking to a social media platform on Saturday (local time), Musk said: "Twitter legal just called to complain that I violated their NDA by revealing the bot check sample size is 100!."
Musk said in a tweet early Friday that the deal was temporarily on hold pending an inquiry into the number of "spam/fake" accounts that exist on Twitter. He later clarified that he was still serious about the acquisition.
These "bot" accounts about which he raised concerns represent a financial risk for Twitter. Musk has said he intends to remove these accounts when he completes his acquisition of the company. But bots generate revenue just as normal accounts do, thanks to viewing the same ads. If there are more fake accounts than Twitter lets on, removing them would mean a drop in revenue.
Two people close to the deal who spoke on the condition of anonymity because they're not authorized to speak publicly said the tweet reflected an effort by Musk to bring the price down from $44 billion. That amount was settled before the stock market tanked in recent weeks, making the acquisition comparatively more expensive for Musk.
Can he back out?
Like most merger agreements, Twitter's contract with Musk contains a "material adverse effect" clause. Essentially, the clause means that if something significant happens to Twitter before the deal is closed, and it affects the company's long-term business in a major way, the deal can be called off.
But the problem of bots is not sufficient cause, said Urska Velikonja, a professor at Georgetown University's law school. "If he tries to litigate it, he's losing," she said.
Twitter has long said that about 5 percent of its user accounts are bots, but that number has been subject to scrutiny, and several reports over the years have suggested
Musk, whose net worth fell by roughly $50 billion in recent weeks as the markets battered Tesla and other tech stocks, is free to back out of the deal if he gets cold feet. Much of Musk's wealth comes from his 17 percent stake in Tesla. The electric-car company is now worth close to $800 billion. Musk has financed the majority of his Twitter acquisition but still needs to put up $21 billion, which he aims to obtain via outside investments.
On Saturday, Musk alluded to his new economic reality. "Whoever thought owning the libs would be cheap never tried to acquire a social media company!" he tweeted.
Twitter recently agreed to an acquisition by Tesla CEO Elon Musk in a deal worth USD 44 billion, although it is still subject to shareholder approval. However, Elon Musk declared that the USD 44 billion takeover bid of the micro-blogging site is on hold.
Musk said earlier this week that Twitter's decision to ban former US President Donald Trump was a mistake and he would reverse it if his acquisition of the social media company is successful.