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Musk Pulls Out of $44 Billion Deal, Twitter Says Will Pursue Legal Action

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By Reuters | Updated: 9 July 2022

Elon Musk, the chief executive officer of Tesla and the world’s richest person, said on Friday he was terminating his $44 billion (roughly Rs. 3,49,060 crore) deal to buy Twitter because the social media company had breached multiple provisions of the merger agreement.

Twitter’s chairman, Bret Taylor, said on the micro-blogging platform that the board planned to pursue legal action to enforce the merger agreement.

“The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk…,” he wrote.

In a filing, Musk’s lawyers said Twitter had failed or refused to respond to multiple requests for information on fake or spam accounts on the platform, which is fundamental to the company’s business performance.

“Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement,” the filing said.

Musk also said he was walking away because Twitter fired high-ranking executives and one-third of the talent acquisition team, breaching Twitter’s obligation to “preserve substantially intact the material components of its current business organisation.”

Legal Battle

Musk’s decision is likely to result in a protracted legal tussle between the billionaire and the 16-year-old San Francisco-based company.

Disputed mergers and acquisitions that land in Delaware courts more often than not end up with the companies re-negotiating deals or the acquirer paying the target a settlement to walk away, rather than a judge ordering that a transaction be completed. That is because target companies are often keen to resolve the uncertainty around their future and move on.

Twitter, however, is hoping that court proceedings will start in a few weeks and be resolved in a few months, according to a person familiar with the matter.

There is plenty of precedent for a deal renegotiation. Several companies repriced agreed acquisitions when the COVID-19 pandemic broke out in 2020 and delivered a global economic shock.

In one instance, French retailer LVMH threatened to walk away from a deal with Tiffany & Co. The US jewelry retailer agreed to lower the acquisition price by $425 million (roughly Rs. 3,370 crore) to $15.8 billion (roughly Rs. 1,25,350 crore).

“I’d say Twitter is well-positioned legally to argue that it provided him with all the necessary information and this is a pretext to looking for any excuse to get out of the deal,” said Ann Lipton, associate dean for faculty research at Tulane Law School. Shares of Twitter were down 6 percent at $34.58 (roughly Rs. 2,700) in extended trading. That is 36 percent below the $54.20 (roughly Rs. 4,300) per share Musk agreed to buy Twitter for in April.

Twitter’s shares surged after Musk took a stake in the company in early April, shielding it from a deep stock market sell-off that slammed other social media platforms.

But after he agreed on April 25 to buy Twitter, the stock within a matter of days began to fall as investors speculated Musk might walk away from the deal. With its tumble after the bell on Friday, Twitter was trading at its lowest since March.

The announcement is another twist in a will-he-won’t-he saga after Musk clinched the deal to purchase Twitter in April but then put the buyout on hold until the social media company proved that spam bots account for less than 5 percent of its total users.

The contract calls for Musk to pay Twitter a $1 billion (roughly Rs. 7,900 crore) break-up if he cannot complete the deal for reasons such as the acquisition financing falling through or regulators blocking the deal. The break-up fee would not be applicable, however, if Musk terminates the deal on his own.

Some employees expressed disbelief and exhaustion on Friday, publicly posting memes on Twitter, such as of a rollercoaster ride and a baby screaming into a phone, in apparent commentary on the breakup. Employees have worried about the deal will mean for their jobs, pay and ability to work remotely, and many have expressed skepticism about Musk’s plans to loosen content moderation.

Digital ad woes

Musk’s abandonment of the deal and Twitter’s promise to vigorously fight to complete it casts a pall of uncertainty over the company’s future and its stock price during a time when worries about rising interest rates and a potential recession have hammered Wall Street. Shares of online advertising rivals Alphabet, Meta Platforms, Snap and Pinterest have seen their stocks tumble 45 percent on average in 2022, while Twitter’s stock has declined just 15% in that time, buoyed in recent months by the Musk deal.

Daniel Ives, an analyst at Wedbush, said Musk’s filing was bad news for Twitter.

“This is a disaster scenario for Twitter and its Board as now the company will battle Musk in an elongated court battle to recoup the deal and/or the breakup fee of $1 billion (roughly Rs. 7,900 crore) at a minimum,” he wrote in a note to clients.

© Thomson Reuters 2022

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Elon Musk to Be Questioned Under Oath in Twitter Lawsuit on September 26: All Details

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By Reuters | Updated: 21 September 2022

Twitter Inc will question Elon Musk under oath in Delaware next week as part of the litigation in the billionaire’s bid to walk away from his $44 billion (roughly Rs. 3,51,320 crore) deal for the social media company.

A Tuesday filing in Delaware’s Court of Chancery said Musk’s deposition is scheduled for September 26-27 and may stretch into Sept. 28 if necessary.

The two sides are locked in an increasingly acrimonious legal battle that has swept up of some of the biggest names in Silicon Valley and Wall Street.

Subpoenas have being issued to billionaire Larry Ellison, the co-founder of Oracle, Intel’s former Chief Executive Officer Robert Swan and Twitter co-founder Jack Dorsey, who is currently chief executive of Block Inc.

A five-day trial is scheduled to begin on October 17 in Wilmington, Delaware.

Each side has accused the other of breaking the April takeover agreement. Twitter wants a judge to order Musk, who is chief executive of Tesla Inc and the world’s richest person, to buy the company as agreed for $54.20 (roughly Rs. 4,300) per share.

Shares in San Francisco-based company were down slightly in early Tuesday trading at $41.54 (roughly Rs. 3,300).

On Tuesday, Bloomberg reported that court filings had revealed that Twitter co-founder Jack Dorsey would be deposed in the company’s lawsuit that is set to begin next month. Ever since Musk and Twitter reached an agreement, Dorsey has been supportive of the takeover deal for the microblogging service. He was previously subpoenaed by the Tesla CEO in August, and was to be questioned under oath by Twitter and Musk on Tuesday, according to the report.

Musk has reportedly accused the firm of concealing serious flaws in its data security. He has also alleged that Twitter hid from him that it was not complying with a 2011 agreement with the Federal Trade Commission (FTC) regarding user data, based on claims made by whistleblower and former security chief Peiter Zatko, who has also alleged that Twitter had allowed access to agents from foreign governments.

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Twitter India Summoned to Appear Before DCW on September 26 Over Objectionable Content

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By ANI | Updated: 20 September 2022

The Delhi Commission for Women (DCW) has summoned Twitter India and Delhi Police officials over alleged videos of child pornography and rape being shared on the social media platform. DCW took suo moto cognizance of several alleged tweets on the social media platform Twitter displaying child pornography.

“Videos of child pornography were shared on Twitter and were sold for Rs. 20. Twitter is yet to delete them and report it further. We have summoned the head of Twitter India and have sought a report. We have also summoned Delhi Police and have sought immediate action,” DCW chief Swati Maliwal told ANI.

DCW said these tweets are openly depicting videos and photographs of sexual acts involving children.

In its letter to Twitter India and Delhi Police, the Commission said, “Some of the twitter accounts engaging in these criminal acts appear to be running a racket wherein they seek money for providing pornographic and rape videos of children and women from other users of the social media platform,” said DCW.

The Commission claimed there appears to be hundreds of such objectionable videos on the social media platform which are openly displaying child pornography and rape videos of women and children.

DCW said it is deeply distressing that such illegal acts involving sexual abuse of children and young women are being publicised openly through the social media platform Twitter.

The Commission said it wishes to ascertain the steps being taken by Twitter to prevent such “filthy and outrightly criminal acts” being propagated through its medium as well as the systems in place in the platform to immediately report the same to law enforcement agencies.

“Now therefore you are hereby summoned to appear before the Commission for the purpose aforementioned on September 26. If you fail to comply with this order without lawful excuse, you will be subjected to the consequences of non-attendance as provided in law,” stated DCW.

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Dutch town takes Twitter to court to remove conspiracy theories

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By: Reuters, September 17, 2022

THE HAGUE, Sept 16 (Reuters) – A small Dutch town took Twitter (TWTR.N) to court on Friday to demand the social media giant takes down all messages relating to a supposed ring of satan-worshipping paedophiles that were alleged to have been active in the town in the 1980s.

Bodegraven-Reeuwijk, a town of around 35,000 inhabitants in the middle of the Netherlands, has been the focus of conspiracy theories on social media since 2020, when three men started spreading unfounded stories about the abuse and murder of children they said took place in the town in the 1980s.

The main instigator of the stories said he had childhood memories of witnessing the abuse by a group of people in Bodegraven.

The stories caused much unrest in Bodegraven, as scores of followers of the men’s tweets flocked to the local graveyard to lay flowers and written messages at the graves of seemingly random dead children, who they claimed were victims of the satanic ring.

Twitter’s lawyer Jens van den Brink declined to comment before the hearing at The Hague District Court on Friday.

Last year the same court ordered the men to immediately remove all their tweets, threats and other online content relating to the story and to make sure that none of it could ever emerge again.

But despite their conviction, stories about Bodegraven still circulate on social media as others have continued to echo their story, leading the town to take the matter up with Twitter itself.

“If conspiracy theorists don’t remove their messages, then the platforms involved need to act,” the town of Bodegraven’s lawyer Cees van de Zanden was quoted as saying by Dutch newspaper De Volkskrant on Friday.

Van de Zanden said that in July the town requested Twitter to actively find and remove all messages relating to the Bodegraven story, not only those posted by the three convicted men, but had so far not received an answer from the U.S. company.

The men behind the Bodegraven story are currently all in jail, as they have been convicted in other court cases for incitement and making death threats to a range of people including Prime Minister Mark Rutte and former health minister Hugo de Jonge.

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Twitter agreed to pay whistleblower $7 million in June settlement – WSJ

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By: Reuters, September 9, 2022

Sept 8 (Reuters) – Twitter Inc (TWTR.N) agreed in June to pay about $7 million to the whistleblower whose allegations will be part of Elon Musk’s case against the company, the Wall Street Journal reported on Thursday, citing people familiar with the matter.

The whistleblower, Peiter “Mudge” Zatko, who was fired by Twitter in January and was the company’s security head, last month accused the social media firm of falsely claiming it had a solid security plan and making misleading statements about its defenses against hackers and spam accounts.

Zatko will meet the U.S. Senate Judiciary committee on Sept. 13 to discuss the allegations.

The settlement was completed days before Zatko filed his whistleblower complaint in July, according to the WSJ report. (https://on.wsj.com/3L3uRb1)

As part of the settlement, Zatko agreed to a nondisclosure agreement that forbids him from speaking publicly about his time at Twitter or disparaging the company, the WSJ said.

The confidential June settlement was related to Zatko’s lost compensation and followed monthslong mediation over tens of millions of dollars in potential pay, the WSJ reported.

Twitter did not immediately respond to a Reuters request for comment.

Musk is engaged in a head-on legal battle with Twitter over his offer to buy the company for $44 billion after he changed course to drop the deal saying the social media firm had misled him about the number of bots and fake accounts on the site.

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Musk can use Twitter whistleblower but not delay case: Judge

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By: Associated Press, September 8, 2022

Elon Musk will be able to include new evidence from a Twitter whistleblower as he fights to get out of his $44 billion deal to buy the social media company, but Musk won’t be able to delay a high-stakes October trial over the dispute, a judge ruled Wednesday.

Chancellor Kathaleen St. Jude McCormick, the head judge of Delaware’s Court of Chancery, denied Musk’s request to delay the trial by four weeks. But she allowed the billionaire Tesla CEO to add evidence related to whistleblower allegations by former Twitter security chief Peiter Zatko, who is scheduled to testify to Congress next week about the company’s poor cybersecurity practices.

Twitter has sued Musk, asking the Delaware court to force him to go through with the deal he made in April to buy the company. Musk has countersued and a trial is set to start the week of Oct. 17. Musk’s legal team has argued that the allegations made by Zatko to U.S. officials may help bolster Musk’s claims that Twitter misled him and the public about the company’s problem with fake and “spam” accounts.

Zatko, a well-known cybersecurity expert known by his hacker handle “ Mudge,” said he was fired in January after raising flags about Twitter’s negligence in protecting the security and privacy of its users.

The judge’s ruling followed an hours-long hearing Tuesday at which attorneys for Musk and Twitter argued with each other about the merits of Zatko’s claims and the pace at which both sides are producing evidence ahead of the trial.

Twitter’s attorneys sought to downplay the relevance of Zatko’s allegations to the merger dispute, arguing that an initial 27-page complaint he sent to Twitter and a later retaliation clam made no mention of the “spam bot” issues that Musk has given as a reason to terminate the deal. Zatko “never said a word about spam or bots” until his July whistleblower complaint, said Twitter attorney William Savitt.

Twitter has argued for weeks that Musk’s stated reasons for backing out were just a cover for buyer’s remorse after agreeing to pay 38% above Twitter’s stock price shortly before the stock market stumbled and shares of the electric-car maker Tesla, where most of Musk’s personal wealth resides, lost more than $100 billion of their value.

McCormick, the judge, said Wednesday the newly published whistleblower complaint gave Musk’s team grounds to amend its countersuit but she declined to weigh in on the details.

“I am reticent to say more concerning the merits of the counterclaims at this posture before they have been fully litigated,” she wrote. “The world will have to wait for the post-trial decision.”

McCormick, however, sided with Twitter’s concerns that delaying the trial would make it harder for the company to get back to business. “I am convinced that even four weeks’ delay would risk further harm to Twitter too great to justify,” she wrote.

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Ireland fines Instagram a record $400 mln over children’s data

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By Reuters, September 5, 2022

DUBLIN, Sept 5 (Reuters) – Ireland’s data privacy regulator has agreed to levy a record fine of 405 million euros ($402 million) against social network Instagram following an investigation into its handling of children’s data, a spokesperson for the watchdog said.

Instagram plans to appeal against the fine, a spokesperson for parent Meta Platforms Inc said in an emailed statement.

The investigation, which started in 2020, focused on child users between the ages of 13 and 17 who were allowed to operate business accounts, which facilitated the publication of the user’s phone number and/or email address.

“We adopted our final decision last Friday and it does contain a fine of 405 million euro,” said the spokesperson for Ireland’s Data Protection Commissioner (DPC), the lead regulator of Instagram’s parent company Meta Platforms Inc.

Full details of the decision will be published next week, he said.

Instagram updated its settings over a year ago and has since released new features to keep teens safe and their information private, the Meta spokesperson said.

The spokesperson said Instagram disagrees with how the fine was calculated and is carefully reviewing the decision.

The DPC regulates Facebook, Apple, Google and other technology giants due to the location of their EU headquarters in Ireland. It has opened over a dozen investigations into Meta companies, including Facebook and WhatsApp.

WhatsApp was last year fined a record 225 million euros for failing to conform with EU data rules in 2018.

The Irish regulator completed a draft ruling in the Instagram investigation in December and shared it with other European Union regulators under the bloc’s “one stop shop” system of regulating large multinationals.

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