Elon Musk, CEO of Tesla, has once again justified his request to cancel the $44 billion Twitter acquisition deal. This time, the billionaire cites recent claims by a former security head of the social media firm that back up his position on the number of spam accounts on Twitter.
In a complaint filed last week, Peiter Zatko, a well-known hacker known as “Mudge,” who served as Twitter’s head of security from November 2020 until his firing in January, claimed that Twitter prioritized user growth over spam reduction and falsely claimed it had a solid security plan.
Musk’s legal team cited Zatko’s claims as another reason to cancel the deal in a letter dated August 29, 2022, sent to Twitter.
According to the letter, which was disclosed in a Securities and Exchange Commission filing, Zatko claims that Twitter violates its 2011 consent order with the Federal Trade Commission; that the company has serious security vulnerabilities; that it has violated intellectual property rights; and that it agreed to hire Indian government agents under pressure from the country.
Musk’s legal team claims that if the allegations are true, they violate Twitter’s side of the acquisition bargain and should allow him to walk away from the deal. The letter claims that Twitter’s alleged misrepresentations to its board and regulators and any subsequent investigations have or could have a “material adverse effect” that would allow him to terminate his contract.
Musk decided to terminate the $44 billion deal in July, claiming that the company misled him and regulators about the actual number of spam or bot accounts on the microblogging platform.
Elon Musk’s lawyer, Mike Ringler, cited numerous reasons for his decision to resign in a Securities and Exchange Commission filing, including the fact that “Twitter has not complied with its contractual obligations.”
Ringler claimed that Twitter failed to provide Musk with the relevant business information he requested, as required by the contract. Musk previously stated that he wanted to investigate Twitter’s claim that approximately 5% of its monetizable daily active users (mDAUs) are spam accounts.
According to a regulatory filing by Musk on Tuesday, his legal team stated that allegations on certain facts, which were known to Twitter before July 8 but were not disclosed to them, provide additional and distinct grounds to terminate the deal.
The latest development comes as the two parties prepare for a five-day trial at the Delaware Court of Chancery, which is set to begin on October 17. Twitter has asked Chancellor Kathleen McCormick to order Musk to purchase the company for the agreed-upon price of $54.20 per share.
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