- Twitter shares slipped Tuesday after Elon Musk cited a Twitter whistleblower as reason to end the deal.
- Musk's legal team filed an additional notice of termination to Twitter in a letter filed with the SEC.
Twitter shares slipped Tuesday after Elon Musk cited a whistleblower who spoke out against the social media company as another reason to exit his pending multi-billion dollar merger takeover.
Shares fell as much as 3.4% in premarket trade before paring the loss to 1.1% at $39.59. A broader rebound in the US market during the summer helped the stock narrow its year-to-date loss to about 7%.
Musk's legal team in a letter to Twitter filed an "additional notice of termination" to the company citing a wide-ranging whistleblower complaint by Peiter Zatko, the former head of Twitter cybersecurity.
Musk in July said he intended to scrap scrap his deal to buy Twitter, saying he believed there were more bot accounts on the platform than Twitter had disclosed.
The "Musk Parties are delivering this additional termination notice in the event that the July 8 Termination Notice is determined to be invalid for any reason," said the letter to Twitter dated August 29 and filed with the Securities and Exchange Commission. Twitter has sued Musk to ensure the deal is completed.
The Washington Post this month published a 84-page complaint written by Zatko, who is also renowned hacker known as "Mudge." Zatko's accusations included Twitter of having poor security practices and "lying" to Elon Musk about spam accounts on its site. A Twitter spokesperson told Insider this month Zatko's allegations are "riddled with inaccuracies" and that he was fired for "ineffective leadership and poor performance."
"Up until the Zatko development, the Street was factoring in Twitter to have a clear win in the Delaware Courts in October. There are a range of possibilities that can come from the Delaware court including settlement, breakup fee paid, deal enforced, and a myriad of other outcomes," said Wedbush analyst Dan Ives in a note Tuesday.
"For now Twitter's stock will continue to trade on deal odds as the long and ugly courtroom battle now begins to play out in Delaware courts," said Ives. The trial is slated to begin on October 17.