Legal experts widely speculated that Musk is using the bot issue as an excuse to abandon or renegotiate the deal, which has looked better and better for Twitter as the broader stock market has taken a dive in recent weeks.
Last month, Musk said he was putting the deal “on hold” until the social media giant can prove bots make up fewer than 5 percent of its users, as the company has stated in public filings. Musk has estimated that fake accounts make up at least 20 percent of all users. “The board of Twitter is going to get tired of this and file a lawsuit in Delaware and say, ‘I want a declaratory judgment saying that I am not in violation of the agreement and that Musk has to complete the deal,’” said Brian Quinn, an M&A professor at Boston College Law School. “That’ll be Twitter’s next step.”
Musk believes the company’s resistance to provide more information 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.”
“He obviously was aware of the bots issue—he was open about that as something he wanted to fix, as an area to create value,” said Freedman. “He would likely have to demonstrate that Twitter’s methodology is reckless or negligent” in order to force the company to renegotiate the deal. That claim is also complicated by the fact that numerous financial institutions have handed Musk commitment letters for debt financing, said Quinn.