Elon Musk has withdrawn his $44bn bid to buy Twitter
speculation that his deal to take over the company was falling apart.
Mr Musk said he had backed out because Twitter failed to provide enough
information on the number of spam and fake accounts.
Twitter says it plans to pursue legal action to enforce the agreement.
“The Twitter Board is committed to closing the transaction on the price and terms
agreed upon with Mr. Musk,” Twitter chairman Bret Taylor wrote in a tweet, setting
up a potentially long and protracted legal battle between the two sides.
The original merger agreement includes a $1bn (£830m) break-up fee.
The likely unraveling of the acquisition was just the latest twist in a saga between the
billionaire businessman and one of the most influential social media platforms, and
it may portend a titanic legal battle ahead.
The Tesla CEO and richest man on earth had reached a deal to buy Twitter on 25
April, with Musk offering to purchase all of the company’s shares for $54.20 each.
But things took a sour turn when Musk and his lawyers accused Twitter of
withholding information about the number of “spam” accounts on the platform. This
week, the company revealed that it was suspending more than 1m spam accounts a
day.
In the Friday filing, lawyers for Musk wrote that Twitter had not provided
information on its “process for auditing the inclusion of spam and fake accounts” in
spite of repeated requests.
“Twitter has failed or refused to provide this information. Sometimes Twitter has
ignored Mr Musk’s requests, sometimes it has rejected them for reasons that appear
to be unjustified, and sometimes it has claimed to comply while giving Mr Musk
incomplete or unusable information,” the letter said.
Musk also said the information is fundamental to Twitter’s business and financial
performance, and is needed to finish the merger.
The company said it was “confident we will prevail in the Delaware court of
chancery”, the court where any legal showdown would take place.
Read Also:Elon Musk threatens to walk away from Twitter deal
Musk declared his takeover bid on 14 April, and Twitter’s board agreed after Musk
confirmed a funding package for the deal that included $21bn of his own money.
With the deal, Musk stood to take control of a social media network with more than
200 million users. An avid, but critical user of the platform, he had vowed to push
through various reforms, including relaxing its content restrictions, ridding the
platform of fake and automated accounts and shifting away from its advertising-
based revenue model.
Musk announced on 13 May that the deal was “on hold” while he awaited details
supporting Twitter’s assertion that fewer than 5% of its users were spam or fake
accounts. He asserted the figure was 20% and said Twitter would need to show proof
of the lower number for the purchase to go through.
Twitter chief executive, Parag Agrawal, attempted to address Musk’s concerns in a
lengthy tweet thread but his efforts to explain the problem “with the benefit of data,
facts, and context” were met with a poo emoji from the world’s richest person.
Musk later suggested he could seek to pay a lower price for Twitter because of the
fake accounts issue. Speaking virtually at a conference in Miami, he said reducing his
agreed $54.20 a share offer would not be “out of the question”. However, the terms of
Musk’s takeover agreement with Twitter gave him only limited room for manoeuvre,
legal experts said.
The Musk takeover had been controversial among Twitter employees, with
consternation among staff growing after Musk engaged with tweets criticizing
Twitter staff following the announcement of the agreement.
Analysts said the break-up, with or without a court battle, would probably be
damaging to Twitter’s valuation and its ability to seek a new buyer.
“This is a disaster scenario for Twitter and its board as now the company will battle
Musk in an elongated court battle to recoup the deal and/or the breakup fee of $1bn
at a minimum,” said Dan Ives, a Wedbush analyst.
Twitter’s stock, which was trading at about $38 per share on Friday and far below the
$54 per share Musk had offered, “will now likely trade in the $25-$30 range when the
stock opens on Monday with no deal likely”, Ives said.
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