Tesla’s CEO Elon Musk warned Twitter in a statement on Monday that if it fails to give him with data on spam and bogus accounts, he may back out of his $44 billion offer to buy the social media company.

This isn’t the first time Musk has hinted that his takeover of Twitter might not go through. However, the warning, which came in the form of a letter from Musk’s lawyers to Twitter’s chief legal officer, Vijaya Gadde, signified a significant step forward. It accused Twitter of “materially breaching” its contract commitments.

Musk’s warnings to rip up the contract have coincided with a drop in many technology equities, including Tesla Inc, the electric vehicle company he runs, as investors worry about an economic downturn and higher interest rates in the face of soaring inflation.

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On Monday, Twitter shares fell 1.5 per cent to $39.57, a significant discount to the planned $52.20 purchase price, as investors wagered Musk will either persuade Twitter to accept a lower deal price or walk away from the deal.

Musk’s attorneys reaffirmed their request for facts on bot accounts in a letter to Twitter, saying he reserved all rights to cancel the transaction because the business had failed to meet its duties in a “clear material violation”.

Twitter responded by stating that it intended to enforce the deal’s completion on the agreed-upon conditions. “In order to complete the acquisition in accordance with the terms of the merger agreement, Twitter has and will continue to cooperatively exchange information with Musk,” the firm stated in a statement.

Musk, a self-proclaimed free-speech absolutist, has stated that removing “spam bots” from the platform will be one of his top goals.

In mid-May, he announced that the Twitter transaction was “temporarily on hold,” stating that he will not forward with the offer unless the firm can prove that spam bots make up less than 5 per cent of its overall users. He has stated that spam bots account for at least 20 per cent of the user base.

According to independent analysts, 9 per cent to 15 per cent of the millions of Twitter profiles could be bots.

Musk wrote in his letter that he needs the information to perform his own analysis of Twitter users because he doesn’t trust the company’s “loose testing techniques.” Twitter has stated that it stands by its forecasts and that it is unable to reveal private information on how they are generated.

“He’s trying to back out of the Twitter transaction, and this is the first shot across the bow,” according to Wedbush analyst Dan Ives.

The caveats Twitter employed in its forecasts on spam accounts, according to legal experts, give it some protection against prospective lawsuits, whether from Musk over the transaction or shareholders over the integrity of the company’s regulatory representations.

Even if Twitter’s estimate is incorrect, Musk would have to establish that the San Francisco-based business was attempting to deceive with the intent to deceive – a high legal bar.

“It’s quite evident that Musk has buyer’s remorse, and he’s doing all he can to get a price reduction, and I believe he’ll succeed,” Dennis Dick, a proprietary trader at Bright Trading LLC, said.

To be sure, Musk may be able to walk away or renegotiate the deal even if the law is on Twitter’s side.

This is because any litigation is likely to be protracted, and Twitter may decide it makes more sense to agree to a lower price or receive compensation from Musk rather than try to force him to complete the transaction in court.

Several companies renegotiated or walked away from 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 U.S. jewelry retailer agreed to lower the acquisition price by $425 million to $15.8 billion.

Musk is contractually forced to pay a $1 billion breakup fee if he cannot complete the sale because the loan financing falls apart or authorities stop it, according to Forbes, a sliver of his $219 billion fortune.

Last Monday, antitrust officials in the United States opted not to investigate Musk’s acquisition of Twitter any further, indicating that it is unlikely to face regulatory challenges. The deal is still being reviewed by the European Union.

Attorney General Ken Paxton of Texas stated on Monday that he has launched an investigation against Twitter for “possibly fraudulent reporting regarding its bogus bot accounts,” which he described as a possible violation of state law.

As part of the investigation, Paxton requested that Twitter provide over documents. “I have a responsibility to safeguard Texans if Twitter is misrepresenting how many accounts are fraudulent to increase their revenue,” Paxton said in a statement.

Twitter’s filings with the Securities and Exchange Commission, according to a spokeswoman, are accurate.