By Geoffrey Smith
Investing.com -- Twitter (NYSE:TWTR) stock plunged in premarket trading on Monday after Tesla (NASDAQ:TSLA) CEO Elon Musk threatened to terminate his takeover offer for the company because of its refusal to give him the information he wants over fake accounts on its social media site.
Musk argued in a filing with the Securities and Exchanges Commission that the Twitter board's failure to give him more detailed information on fake and spam accounts constituted a breach of their agreement, under which Musk and other investors would take the company private at a price of $54.20 a share.
"Twitter has...refused to provide the information that Mr. Musk has repeatedly requested since May 9, 2022 to facilitate his evaluation of spam and fake accounts on the company’s platform," the filing said. Its offer to "simply provide additional details regarding the company’s own testing methodologies, whether through written materials or verbal explanations, is tantamount to refusing Mr. Musk’s data requests."
Twitter CEO Parag Agrawal has said the company's research shows that "well under 5%" of its users over the last four quarters have been spam or fake accounts. Musk contends that the actual number is a multiple of that. Musk had said in late May that the deal was "temporarily on hold" due to the dispute.
"Mr. Musk has made it clear that he does not believe the company’s lax testing methodologies are adequate so he must conduct his own analysis," the filing said. "The data he has requested is necessary to do so."
Twitter has argued that to provide the data required by Musk, it would have to breach the confidentiality agreements it has with its users. That privilege of anonymity is, ironically, preferred by many of the accounts that side with Musk in his various online spats on the platform.
The back-and-forth over spam accounts is taking place against a backdrop of concerns that the sharp drop in Tesla's stock price in the last couple of months is making it harder for him to raise the money for the deal. Musk said in May that he had raised more commitments to fund the deal with equity, reducing the amount he would have to borrow to complete the acquisition.
Twitter stock fell 3.8% at the open on Monday to trade at $38.75 by 9:37 AM ET (1337 GMT). Tesla stock by contrast was up 2.1%. Tesla stock has tended to have an inverse relationship with Twitter stock since the deal, given that Musk may need to sell or borrow against his holding in the electric vehicle company to raise the money for the deal. As such, anything that reduces the chance of the Twitter takeover going through reduces the likelihood of an overhang in Tesla.