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Twitter says its multimillion-dollar payout to whistleblower shouldn't affect deal with Elon Musk

Twitter shareholders will vote on Tuesday on whether to approve or reject Musk’s takeover bid.
Image: Elon Musk
Elon Musk listens as Chicago Mayor Rahm Emanuel talks about constructing a high speed transit tunnel at Block 37 during a news conference on June 14, 2018 in Chicago, Ill.Joshua Lott / Getty Images file
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Twitter said Monday that payments to a whistleblower did not breach any of its obligations under the $44 billion acquisition proposed by Elon Musk, after the billionaire sent a third letter to try to call off the deal.

The social media giant said it intends to enforce the agreement and close the transaction on the price and terms agreed upon with Musk, according to a Securities and Exchange Commission filing.

Twitter shareholders will vote on Tuesday on whether to approve or reject Musk’s takeover bid.

Twitter’s board of directors has previously urged its shareholders to approve the company’s sale to Musk.

On Friday, Musk’s legal team sent a letter to Twitter, citing another reason to call off the proposed acquisition. Musk’s team alleged that the multimillion-dollar payment Twitter paid to whistleblower Peiter “Mudge” Zatko violated the terms of the deal.

Zatko last month alleged “extreme, egregious deficiencies” by the social media company related to privacy, security and content moderation.

The Tesla CEO’s legal team first filed a notice on July 8 with the SEC to terminate the Twitter acquisition, alleging that “Twitter has not complied with its contractual obligations.”

A follow-up letter on Aug. 29 cited allegations made by Zatko as a reason why the deal should not go ahead.

In Friday’s letter, Musk’s legal team said an alleged $7.75 million severance payment to Zatko from Twitter is another breach of the takeover agreement.

Twitter said it has not breached any of its obligations.

“As was the case with both your July 8, 2022 and August 29, 2022 purported notices of termination, the purported termination set forth in your September 9, 2022 letter is invalid and wrongful under the Agreement,” the social media giant’s legal team wrote to Musk’s representatives.

“Twitter has breached none of its representations or obligations under the Agreement, and following the receipt of the approval of Twitter’s stockholders at its September 13, 2022 special meeting, all of the conditions precedent to the closing of the Merger will be satisfied.”

The Twitter-Musk saga has become very complicated. Musk initially proposed buying the company in April. After some resistance, Twitter agreed to the deal.

Image: Peiter Zatko
Peiter Zatko in Washington, on Aug. 22, 2022. Matt McClain / The Washington Post via Getty Images file

Shortly after, Musk began complaining that the number of fake or spam accounts on the social media platform is higher than is being disclosed. 

Twitter and Musk will go on trial on Oct. 17 in Delaware to resolve Musk’s attempt to cancel his acquisition of the company unless they reach a settlement first.

Musk will be allowed to include the allegations made by Zatko in his countersuit.

The matter is complicated by a Tuesday Twitter shareholder vote which could green light the acquisition, but the court case still hangs over the deal.