Elon Musk claims that the revelations made by the former head of security at Twitter have given him further reasons to back out of his $44 billion acquisition of the social media company.
On August 29th, Musk’s attorneys sent a fresh “Termination Letter” to the SEC, citing Peiter “Mudge” Zatko’s testimony as proof that Twitter deceived Musk in the parties’ merger agreement. Citing Zatko’s accusations, Musk specifically asserts that Twitter’s statement in the merger agreement that it had not deceived the SEC was untrue. Zatko said that Twitter regularly and willfully deceived authorities about the security of its network in his own complaints, which were made public last week.
According to Musk’s latest letter of termination, “[Zatko’s] accusations, if accurate, establish that Twitter has violated the following clauses of the Merger Agreement, providing the Musk Parties the right to terminate the Merger Agreement in accordance with its terms, as more clearly explained below.”
Musk is obviously eager to cancel the arrangement, but he will need to persuade the court that Twitter broke one of the terms of the merger agreement. If not, he will be required to pay a $1 billion fine or execute “particular performance” (meaning: actually buy Twitter).
But it’s unclear if Musk’s new letter of termination makes his argument any stronger. Beginning in July, Musk issued his first letter of termination, which included identical allegations that Twitter had deceived the SEC on its regulatory filings (among other claims). The claim is substantially reiterated in this latest letter, which now includes Zatko’s complaint as supporting documentation.
Zatko’s lawsuit will likely be something of a “wild card” in the court dispute, according to law professor Ann Lipton, who has previously examined the plausibility of Musk’s legal argument for terminating the Twitter transaction. She did, however, state that Musk’s reasons “do not seem to be particularly solid” before the publication of this fresh letter of termination.