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Elon Musk letter cites additional reasons to break Twitter deal

Yahoo Finance legal reporter Alexis Keenan breaks down the latest details in the ongoing lawsuit between Elon Musk and Twitter.

Video Transcript

DAVE BRIGGS: Lawyers for Elon Musk have sent a new letter calling off the billionaire's $44 billion acquisition of Twitter. Let's bring in Yahoo Finance legal correspondent Alexis Keenan for the latest here.

Hi there, Alexis. What are we learning?

ALEXIS KEENAN: OK, a lot going on here in this case, and that's to be expected because this is a very fast-moving case in Delaware Chancery Court. Now, Musk's attorneys, in this letter that was sent to Twitter's lawyer, their chief legal counsel, yesterday-- we're just seeing it today-- it's saying that there's additional justification for Musk to walk away from that $44 billion deal to acquire Twitter in a merger.

Now, the original letter was sent for termination on July 8. These are just additional reasons that his lawyers are making. In that first letter, Musk had argued that Twitter breached the merger agreement by not sharing data related to fake accounts on the platform and also misrepresented those accounts as to its monetizable daily active users.

This new letter is based specifically though on a whistleblower report from Peter Zatko, who was Twitter's former chief security advisor. He was let go from the company back in January, and he's filed this whistleblower report with the FTC, the DOJ, as well as the SEC. Now, Musk says that if the report from Zatko is true that Twitter has breached five additional parts of the merger agreement, specifically in its representations that it made in the contract but also to filings in-- its regulatory filings to the SEC.

Now, most of these arguments, these new ones that are made there, are uphill battles for Musk because they do rest on the judge in Delaware agreeing that it would cause Twitter a material adverse effect that is a really significant change to its business operations. It's just a very high bar to try to prove.

There is one more fraud claim in there though where Musk is saying that Twitter represented in its regulatory filings that it was free of false or misleading statements. So that's the one where he might be able to hang his hat on but not so much more in this particular letter.

RACHELLE AKUFFO: I mean, this really is a fast-moving case that we're seeing here. And, meanwhile, of course, a number of advisory firms are urging shareholders to vote for the deal. So what can you tell us about that?

ALEXIS KEENAN: Yeah, there's a couple major shareholder advisory firms. One is Institutional Shareholder Services, and one is Glass Lewis. Both issued reports today in support of this takeover by Musk, saying that shareholders should go ahead and vote for this. They said, particularly from ISS, that Musk's all-cash offer really equals liquidity plus certainty of value. So they're backing it there. They say it's best to focus on that, the particular fundamentals of the deal, not the ongoing litigation between the parties, saying that, look, there's still a good chance that Musk is going to have to go through with this deal.

But, also, guys, there are a couple more things that Musk has filed today. He's looking to delay the trial about a month. He's looking for a date after November 10. Originally, this case is-- and it's still set for trial on October 17. He said he needs more time to investigate those whistleblower claims.

So a lot of fast-moving parts here. And we'll try to keep all of them brought to you. That's what we've got going on right now.

SEANA SMITH: You certainly are going to be very busy. All right, Alexis, thanks so much.