The Wall Street Journal reported Elon Musk is seeking to terminate his $44 billion agreement to buy Twitter Inc., saying that the company hasn’t provided the necessary data and information he needs to assess the prevalence of fake or spam accounts, according to a regulatory filing Friday.
As you may have guessed, the two sides do not see eye to eye about the termination of the deal. According to The Wall Street Journal, Mr. Musk’s lawyers filed a letter with securities regulators stating that Twitter “is in material breach of multiple provisions of that agreement”, and appears to have made “false and misleading representations” when entering into the agreement.
Chairman of Twitter’s board of directors, Bret Taylor, tweeted: “The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.” Bret Taylor’s tweet was retweeted by CEO of Twitter, Parag Agrawal.
According to The Wall Street Journal, there are no guarantees Mr. Musk will be able to walk away from the deal entirely, as Twitter is expected to challenge his legal arguments.
The Verge reported that since Musk is claiming that Twitter breached the terms of the deal by not being forthcoming about critical business information as it pertains to bots, it’s clear he is trying to get out without paying anything. According to The Verge, the “breakup fee” isn’t mentioned in the filing.
The New York Times reported that Mr. Musk requested information on how many Twitter accounts are bots, and Twitter has given him access to its “firehose,” or stream of tweets. It has continued to share additional information with him.
According to The New York Times, there are many “drastic” actions Mr. Musk could take, but as it pertains to the deal, there are two clear possibilities: He could deliver a letter to Twitter saying he is terminating the deal, and he could sue Twitter. Those two actions would most likely, but not necessarily, happen simultaneously.
In addition, the deal has a “specific performance clause,” which gives Twitter the right to sue Mr. Musk and force him to complete the deal so long as the debt financing he has corralled remains intact. The New York Times also reported that at a minimum, Mr. Musk could be on the hook for a $1 billion breakup fee, based on the terms of the April 25 acquisition agreement with Twitter.
A few days ago, I made a guess that Elon Musk would attempt to find a way to back out of the Twitter agreement. I suspect it will take a long time before the situation can be resolved. In the meantime, there are likely to be people on Twitter, who are huge fans of Elon Musk, that may be feeling disappointed right now.