Twitter threatens to sue Elon Musk over buyout contract

Elon MuskTwitter Inc. (TWITTER) may resort to legal action against Elon Musk if he refuses to go ahead with the agreement to buy the company. A contract was signed in April  2022 in which Musk, a co-founder of Tesla Inc., would acquire TWITTER for $54.20 per share subject to the approval of the shareholders of the company. The total value of the transaction is $44 billion. But Elon Musk is reluctant to proceed with the contract over disagreement on the number of false or spam accounts on the platform. Musk believes that failure on the part of the board to disclose is a fundamental breach of the contract.

Twitter Inc. is a social media company domiciled in the USA. The number of false or malicious accounts affects its monetizable daily active users (mDAU).  mDAU is the number of users that can access the Twitter platform and its products on a daily basis. It is a key metric that affects engagement with advertising on the platform. A high number of fake accounts will reduce the actual number of real accounts that can engage with advertisements that produce the bulk of the company's revenue. Spam accounts can also be used for malicious purposes on the platform. Twitter estimated the number of false or spam accounts to be less than 5% of its mDAU during the first quarter of 2022. This requires a significant judgment by the management but the actual figure may be higher than this.

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