After a tumultuous few weeks of rumours that his deal to take over the firm was unravelling, Elon Musk withdrew his $44 billion offer to buy Twitter.
According to a letter from Musk’s attorneys to Twitter, “Mr. Musk is terminating the merger agreement because Twitter is in material breach of multiple provisions of that agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the merger agreement, and is likely to suffer a Company Material Adverse Effect.”
The announcement follows the world’s richest person’s decision to purchase Twitter in April as the most recent twist in a protracted saga. Mr. Musk claimed that the reason for his withdrawal was that Twitter has not given sufficient details regarding the quantity of spam and false accounts. According to Twitter, legal action will be taken to enforce the contract.
Twitter CEO Bret Taylor tweeted, “The Twitter Board is committed to complete the acquisition on the price and terms agreed upon with Mr. Musk,” setting the stage for what may become a protracted court battle.
But it won’t be easy to back out of the agreement. Musk will need to demonstrate that Twitter broke the terms of the original deal in order to avoid being sued for a $1 billion breakup fee, according to the 95-page acquisition agreement submitted to the US Securities and Exchange Commission. NEW The board of Twitter may also utilise a provision in the agreement known as “specific performance” to ask a judge to order Musk to carry out the arrangement in accordance with its terms.
On April 25, Elon Musk, the CEO of Tesla and the richest man on the planet, announced an agreement to buy Twitter, offering to buy the entire company for $54.20 per share. However, things took a negative turn when Musk and his attorneys claimed that Twitter was hiding data regarding the number of “spam” accounts using its network. The business disclosed last week that it was suspending more than 1 million spam accounts daily.
In the Friday filing, Musk’s attorneys said that despite repeated demands, Twitter has not disclosed information on its “method for evaluating the inclusion of spam and phoney accounts.”
On April 14, Musk announced his takeover bid. After Musk revealed a financial package for the deal that included $21 billion of his own money, the Twitter board approved the acquisition.
Musk hoped to gain control of a social media network with more than 200 million subscribers through the agreement. He had committed to work for several reforms, including easing the platform’s content restrictions, getting rid of false and automated accounts, and moving away from its advertising-based income model. He was an active but critical user of the platform.
On May 13, Musk declared that the acquisition was “on pause” while he needed information to back up Twitter’s claim that less than 5% of its users were spam or fraudulent accounts. He stated that the percentage was 20% and that Twitter would have to provide evidence of a lower proportion in order for the deal to proceed.
Musk’s concerns were addressed by Twitter CEO Parag Agrawal in a lengthy twitter thread, but his attempts to explain the issue “with the benefit of data, facts, and context” were received with a poo emoji from the richest man in the world.
Shares of Twitter dropped 7% to $34 in after-hours trading on Friday, far below the $54.20 Musk had proposed as the purchase price. Tesla’s stock, meanwhile, increased by 2.5 percent to $752.29 per share. Others were unconvinced that the agreement could be salvaged at all, even if Twitter sued Musk.