Tesla Chief Executive Officer Elon Musk said on Friday he was terminating his $44 billion deal for Twitter, saying that the social media company had failed to supply details about fake accounts on the platform.
Shares of Twitter fell 6% in prolonged trading to $34.58.
The stock had zoomed to $51.70 when Musk made his $54.20 offer to purchase the social media giant on April 25.
In a filing, Musk’s lawyers said Twitter had failed or refused to reply to multiple requests for information on fake or spam accounts on the platform, which is prime to the corporate’s business performance.
The Friday filing claimed that “Twitter is in material breach of multiple provisions” of the buyout deal,” and that the corporate “appears to have made false and misleading representations upon which Mr. Musk relied when moving into the Merger Agreement.”
“For nearly two months, Mr. Musk has sought the info and data vital to “make an independent assessment of the prevalence of faux or spam accounts on Twitter’s platform,” Musk’s law firm Skadden Arps said in a letter to Twitter.
Elon Musk cited material breach of multiple provisions of the agreement.AFP via Getty Images
“Twitter has failed or refused to supply this information. Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that seem like unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information.”
In response, Twitter’s chairman Bret Taylor said the social-media giant is ready to take Musk to court.
“The Twitter Board is committed to closing the transaction on the value and terms agreed upon with Mr. Musk and plans to pursue legal motion to implement the merger agreement,” Taylor tweeted Friday afternoon. “We’re confident we’ll prevail within the Delaware Court of Chancery.”
Musk said he told Twitter on June 6 that it breached the merger agreement by not providing enough info on the fake accounts, in accordance with the filing.
In response, Twitter’s chairman Bret Taylor said the social-media giant is ready to take Musk to court.REUTERS
“As Twitter has been on notice of its breach since no less than June 6, 2022, any cure period afforded to Twitter under the Merger Agreement has now lapsed,” Musk said.
Within the Friday filing, Musk acknowledged that Twitter has provided some information but said not as much because it gives its largest advertisers.
“While Twitter has provided some information, that information has include strings attached, use limitations or other artificial formatting features, which has rendered among the information minimally useful to Mr. Musk and his advisors.”
Musk has gone silent on his favorite platform since Friday’s shocking announcement. The tech titan is anticipated to talk Saturday on the Allen & Co.’s Sun Valley Conference in Idaho.
The announcement is one other twist in a will-he-won’t-he saga after the world’s richest person clinched a $44 billion deal for Twitter in April but then put the buyout on hold until the social media company proved that spam and bot accounts were fewer than 5% of users who see promoting on the social media service.
Within the Friday filing, Musk acknowledged that Twitter has provided some information but said not as much because it gives its largest advertisers.AFP via Getty Images
Last month, Twitter allowed Musk access to its “firehose,” a repository of raw data on a whole lot of tens of millions of day by day tweets.
The terms of the deal require Musk to pay a $1 billion break-up fee if he doesn’t complete the transaction.
The choice is prone to end in an extended protracted legal tussle between the billionaire and the 16-year-old San Francisco-based company.
Insiders have speculated that Musk is attempting to renege on the deal because he’s now paying an enormous premium for the corporate consequently of the tech stock correction.
It was reported by The Wall Street Journal on Thursday that Twitter laid off a 3rd of its talent acquisition team.
In Friday’s filing, Musk claimed that Twitter’s recent round of layoffs needed to be approved by him.
Daniel Ives, an analyst at Wedbush, said Musk’s filing was bad news for Twitter.
“It is a disaster scenario for Twitter and its Board as now the corporate will battle Musk in an elongated court battle to recoup the deal and/or the breakup fee of $1 billion at a minimum,” he wrote in a note to clients.
Before the news broke, Twitter CEO Parag Agrawal, who assumed the chief executive job last fall after company co-founder Jack Dorsey stepped down from the role, had reportedly been “willing to go to war to make this deal occur.”
Agrawal could be resulting from receive a payout of $42 million under the present terms of the buyout. As with a handful of other Twitter executives, Agrawal’s payout could be triggered by a so-called “change on top of things” clause of their contracts which kicks in if either of them is terminated inside 12 months of latest ownership assuming the helm of the corporate.