Elon Musk’s legal team filed a new notice to terminate his $44 billion deal to buy Twitter on Tuesday, citing additional reasons.
In pre-market trade, Twitter shares were down more than 1%. The latest filings come after Twitter’s former head of security, Peiter “Mudge” Zatko, accused the social media company earlier this month of “extreme, egregious deficiencies” in privacy, security, and content moderation.
Musk’s legal team initially filed a notice with the Securities and Exchange Commission (SEC) on July 8 to terminate the Twitter acquisition. Musk’s legal team claimed that “Twitter has failed to meet its contractual obligations.”
The SEC received a follow-up notice on Tuesday, citing allegations made by Zatko as additional reasons to terminate the deal.
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“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,” Mike Ringler, Musk’s legal representative from Skadden, Arps, Slate, Meagher & Flom LLP, wrote in a letter to Twitter’s legal chief.
The latest termination notice, according to Ringler, is “not legally required” to end the merger deal, but is being delivered in case the July 8 filing is “determined to be invalid for any reason.”
The Zatko complaint “alleges far-reaching misconduct at Twitter—all of which was disclosed to Twitter’s directors and senior executives, including (CEO) Parag Agrawal—that is likely to have severe consequences for Twitter’s business,” according to Musk’s letter.
According to Musk’s lawyer, Zatko claims that Twitter is in “material noncompliance” with its obligations under its 2011 agreement with the FTC. Some of Zatko’s other allegations were detailed in the letter, including claims that Twitter is “uniquely vulnerable to systemic disruption resulting from data center failures or malicious actors,” which senior management was aware of but “ignored and sought to obfuscate.”
“These allegations, if true, demonstrate that Twitter has violated the following provisions of the Merger Agreement, thereby giving the Musk Parties the right to terminate the Merger Agreement in accordance with its terms as more fully described below,” the letter said.
Unless they reach an agreement first, Twitter and Elon Musk will go on trial in Delaware on Oct. 17 to resolve Musk’s attempt to cancel his acquisition of the company.
