Elon Musk's lawyers on Monday sent a second deal termination letter to Twitter, a follow-up to his initial termination notice in July, this time citing recent allegations made by a Twitter whistleblower.
Why it matters: Musk's legal team is trying to leverage the allegations made by former Twitter security chief Peiter Zatko last week to defend Musk's attempt to walk away from his $44 billion takeover bid.
- Musk's lawyers on Monday filed a subpoena for Zatko, asking for "documents and communications" regarding a number of the alleged wrongdoings Zatko claims, including "Twitter's tracking and measurement of user engagement."
Details: In the new termination letter, they argue that Zatko's allegations, "if true, demonstrate that Twitter has breached" a set of provisions from its merger agreement with Musk, including its compliance with all laws and that its assertion that it never filed misleading information to securities regulators.
- They cite an allegation from Zatko that Twitter violated a 2011 FTC consent decree regarding user data privacy, as well as "its general obligations under data privacy, unfair trade practice, and consumer protection laws and regulations."
Yes, but: The whistleblower complaint doesn't technically support Musk's original argument that Twitter violated its deal terms by misleading investors about the number of spam accounts on its platform and stonewalling information requests.
- Rather, it alleges Twitter deceived regulators about its efforts to reduce spam and protect Twitter from security threats.
What they're saying: "The letter is based solely on statements made by a third party that, as Twitter has previously stated, are riddled with inconsistencies and inaccuracies and lack important context," Twitter said in a statement.
- "Contrary to the assertions in Mr. Musk's letter, Twitter has breached none of its representations or obligations under the Agreement, and Twitter has not suffered and is not likely to suffer a Company Material Adverse Effect," it added.
What to watch: Whether the judge overseeing the case buys Musk's argument at a scheduled hearing between the two parties at a Delaware Chancery Court this October.
Editor's note: This article has been updated with a statement from Twitter.
