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Elon Musk accuses Twitter of 'material breach' of deal, threatens to walk away

Avishek Das/SOPA Images/LightRocket via Getty Images

Tesla and SpaceX CEO Elon Musk is accusing Twitter of refusing to turn over information on spam bot and fake accounts and has threatened to back out of his deal to acquire the company for $44 billion.

Musk's lawyers sent a letter to Twitter's chief legal officer Monday stating that the company is "actively resisting and thwarting his information rights."

"This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement," the letter states.

Twitter disclosed the letter in a filing with the U.S. Securities and Exchange Commission.

The letter states that Musk has made repeated requests since May 9 for information that would allow him to evaluate how many spam and fake accounts are on the company's platform. Instead of providing that information, Twitter has offered to provide details on the company's internal testing methodologies, which Musk's lawyers say is "tantamount to refusing Mr. Musk's data requests."

"Twitter's effort to characterize it otherwise is merely an attempt to obfuscate and confuse the issue," Musk's attorneys said.

Twitter has previously estimated that fewer than 5% of its 229 million accounts are fake or bot accounts, but Musk has rejected that assessment. The billionaire claims the real number could be higher than 20% and has said that the deal made in April to buy Twitter for $54.20 per share and take it private cannot be completed until he receives an accurate count.

"At this point, Mr. Musk believes Twitter is transparently refusing to comply with its obligations under the merger agreement, which is causing further suspicion that the company is withholding the requested data due to concern for what Mr. Musk’s own analysis of that data will uncover," the letter states. "If Twitter is confident in its publicized spam estimates, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to independently evaluate those estimates."

Stock prices for Twitter Inc. took a hit Monday, sliding 1.6% after news of Musk's threat broke.

In a statement to the Associated Press, Twitter said it "has and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement.”

“We intend to close the transaction and enforce the merger agreement at the agreed price and terms,” it added.

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