Elon’s new Twitter gambit

Elon Musk’s lawyers haven’t wasted any time in seizing on last week’s news that Twitter’s former head of security claimed the social network misled US regulators over its cyber security defences and fake accounts.

Here is a new letter that Skadden Arps has written a letter on behalf of Musk to Vijaya Gadde, Twitter’s top lawyer, filing an extra “notice of termination” for the $44bn takeover agreement, on top of the one they’d already filed in July.

On July 8, 2022, the Musk Parties terminated the Merger Agreement (the “July 8 Termination Notice”) on certain bases. Since that time, Twitter has challenged the validity of the July 8 Termination Notice and contends that the Merger Agreement remains in force, a position that the Musk Parties are contesting. Allegations regarding certain facts, known to Twitter prior to and as of July 8, 2022, but undisclosed to the Musk Parties prior to and at that time, have since come to light that provide additional and distinct bases to terminate the Merger Agreement. Although the Musk Parties believe this termination notice is not legally necessary to terminate the Merger Agreement because they have already validly terminated it pursuant to the July 8 Termination Notice, the Musk Parties are delivering this additional termination notice in the event that the July 8 Termination Notice is determined to be invalid for any reason.

The “Allegations” that Musk’s lawyers are referring to are of course claims by Peiter “Mudge” Zatko — briefly Twitter’s former security supremo — that the company has been knowingly lax on cyber defences and spam accounts (among other things).

Musk’s letter naturally goes into detail of all the allegations, and argue that “these violations would have material, if not existential, consequences to Twitter’s business, constituting a Company Material Adverse Effect as defined in the Merger Agreement”.

Basically, Musk is trying to pivot and strengthen his legal justification for walking away from Twitter, from the initial focus on how many fake users there are. But Ann Lipton of Tulane University’s law school has an excellent summary on why Zatko’s “cornucopia” of allegations aren’t actually that helpful for Musk.

She made her most vivid summary of the situation on Twitter though.

Second, these are not the actions of someone playing a gambit to settle for a lower price. These are the actions of a raccoon chewing his leg off to get out of a trap.

— Ann “No Relation” Lipton (@AnnMLipton) August 28, 2022