Tesla CEO Elon Musk, who inked a deal to buy Twitter for $44 billion, has now said that the purchase will not move forward until the social media platform shows proof that bots constitute less than five percent of its daily average users.
"My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of (fake accounts being) fewer than 5 percent. This deal cannot move forward until he does," he wrote in a tweet on Tuesday, 17 May.
He also replied with a 'poop' emoji after Twitter CEO Parag Agrawal explained the company's process in determining the percentage of fake accounts.
This comes three days after Musk said that the deal was "temporarily on hold" while he checked the veracity of the company's claim that spam and fake accounts make up less than 5 percent of users.
He later clarified that he was still committed to the acquisition.
Musk said his team would test "a random sample of 100 followers" of the official Twitter account to figure out if its estimate was accurate, a methodology that has been criticised by experts.
What's Musk Planning?
Elon Musk, despite what he tweets, is in a legally binding agreement which requires him to buy Twitter if closing conditions are met. This can't simply be "put on hold," at least legally.
The contract expressly states that “The parties hereto will use their respective reasonable best efforts to consummate and make effective the transactions contemplated by this Agreement,” the contract says.
Even if Musk reliably proves that Twitter was wrongly estimating the percentage of fake or spam accounts, that likely won't invalidate the deal he will still have to pay up. So, what's he planning?
There's speculation that Musk is laying the groundwork to back out of the deal or renegotiate the price.
He dropped a strong hint at a Miami tech conference on Monday. He said that a viable deal at a lower price wouldn't be "out of the question," according to Bloomberg.
Though Twitter can go to court if Musk tries to change the price, it might not want to go through the hassle of suing him, as that would likely hurt business.
This would allow for an out-of-court negotiation. Twitter could also technically allow Musk to abandon the deal after paying $1 billion as termination fee.
The agreement does have a provision that allows Musk to walk away, but only if Twitter’s filings are inaccurate enough to have a material adverse effect (MAE) on the company – an argument that is rarely accepted by courts.
(With inputs from Bloomberg.)