Elon Musk Threatens To Withdraw From Twitter Deal Over Bot Data 6/07/22 Transcript

Speaker 1: (00:00)
Billionaire Elon Musk is once again, threatening to end his deal to buy Twitter saying the social media giant is withholding information about spam and fake accounts. In a new filing, Musk’s attorney says Twitter is in violation of his client’s acquisition plan that both sides agreed to.

Speaker 2: (00:17)
And last month, when Musk announced his $44 billion purchase of Twitter, he said the deal would not move forward until he had more information about fake accounts and bots on the platform. But let’s bring in NBC News legal analysts, Danny Savalas to help us explain what this all means. Good morning, Danny. So exactly what kind of legal action is Musk using against Twitter and how effective is this tactic?

Danny Savalas: (00:40)
It’s essentially a threat. A threat to withdraw, or really declare that Twitter is in breach. When it comes to contract law, the key is who breaches the contract first. The challenge is each side usually has some theory why the other side was the first to breach. And even where the contract is not fully executed yet, there is such a thing as anticipatory breach, breach before the contract is even in effect. And essentially what Musk is saying is that, look, there was a reasonableness factor in the contract.

Danny Savalas: (01:11)
He cites it in two different areas in his lawyer’s letter, but reasonableness is in the eye of the litigant. And reasonableness to Musk’s side is that, “Well, look, you had to disclose all of this information, particularly if allegedly your SEC filings may not have been completely accurate.” Now Twitter, on the other hand is going to argue to the effect that, “Look, reasonableness is exactly what you got. And furthermore, if you waive due diligence, that means you really didn’t have a right to as much information as someone else might normally have at such a right.”

Speaker 1: (01:46)
Now, Danny Twitter says, though that it’s still moving ahead with the deal saying, “We intend to close the transaction and enforce the merger agreement at the agreed price and terms.” Now, Danny though, I know a key thing at play here is that Musk waived due diligence when he moved to buy the company, explain the impact of that move. What does that mean, and what could it mean when the company and must try to hash out this deal?

Danny Savalas: (02:08)
Contractually, really this can be boiled down to, these are two billion dollar gun slingers staring each other down in a dusty Western town street, because each of them is saying, “This is what’s going to happen. You’re going to give me that stuff, that information, or I’m not going through with the deal.” And essentially, Twitter is saying, “La, la, la, we don’t hear you. We’re moving forward with the deal.

Danny Savalas: (02:30)
And if you don’t show up on that day, then you are the first to breach.” As in the gun slinger analogy, it’s who pulls their firearm first. But in this case under contract law, the party who breaches first loses everything. So as you can see, these are each side’s framing their argument that, “Look at him, he’s breaching first.” And of course the other side’s going to say, “No, no, no, no. You are the one in breach.” And really ultimately, they’re not the ones who would decide, it would be a court.

Speaker 1: (02:59)
Don’t you love the way he breaks the down?

Speaker 2: (03:00)
I love it. And to put it even deeper into context and more framing yesterday, the Texas attorney general announced an investigation into Twitter and its bot users, which is the exact information that Elon Musk wants as you just broke down. And Texas officials say Twitter is misrepresenting how many accounts are fake as a way to drive up revenue, and Twitter is not publicly commented on the investigation, but how could this play out especially when Twitter’s ownership could change really soon?

Danny Savalas: (03:27)
Isn’t it interesting? Elon Musk now has a reasonableness argument, “Hey, even if I waive due diligence,” and home buyers may be familiar with that, especially in the last couple years where that happened a lot with houses in a hot housing market that, “Hey, if you really want this house, you better wave due diligence.” In other words, don’t make a big stink about inspecting the house or other issues with the house. You wave that due diligence. You don’t get to kick the tires, but Elon Musk maybe has a stronger argument now that, “Well, how reasonable are they being if they’re being investigated by law enforcement for exactly the same thing that I am complaining about?”

Speaker 2: (04:06)
A lot to watch out for as we tweet this week. Danny Savalas, thank you so much.

Speaker 1: (04:11)
Thanks, Danny.

Speaker 4: (04:13)
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