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Elon Musk is ending his $44 billion deal to buy Twitter, according to a filing the billionaire made with the Securities and Exchange Commission on Friday.
Musk’s lawyers sent a letter to Twitter saying he was “terminating their merger agreement,” according to the filing. In the letter, Musk argued that he had the right to back out of the deal because Twitter had not given him enough information about the company’s business.
Musk’s lawyers accused Twitter of “failing or refusing” to turn over information that would have helped Musk and his team determine the true number of bots or spam accounts on the social media platform.
“Twitter has sometimes ignored Mr. Musk’s requests, sometimes denied them for reasons that appear to be unjustified, and sometimes claimed to comply by providing Mr. Musk with incomplete or unusable information,” the letter said .
Elon Musk’s deal to buy Twitter is in jeopardy
Twitter Chairman Brett Taylor tweeted on Friday that the company would take legal action against Musk.
“Twitter’s board is committed to closing the transaction at the price and terms agreed upon with Mr. Musk and plans to take legal action to enforce the merger agreement,” he wrote. “We are confident that we will prevail in the Delaware Court of Chancery.”
Legal experts said Musk couldn’t just walk away from the deal. His April agreement to buy the company included a commitment to complete the acquisition unless there was a major change in the business, and legal experts say nothing has happened to meet that threshold. Musk had previously threatened to scuttle the deal if Twitter didn’t give it more data to do its own analysis of how many spam bots it has, while Twitter said it can’t give up personal information about its users like their names, emails and IP addresses, which it uses to come up with its own bot number.
Musk did not immediately respond to requests for comment.
Read the letter filed by Musk’s lawyers seeking to end the $44 billion Twitter deal
In the letter, Musk accused Twitter of materially breaching the terms of the agreement by making “false and misleading” statements and also cited the likelihood of a “material adverse effect,” a significant change that would affect the company’s value.
“In short, Twitter has not provided the information Mr. Musk has requested for nearly two months, despite his repeated, detailed clarifications designed to simplify the identification, collection, and disclosure of the most relevant information sought in Mr. Musk’s original requests.” Musk,” the letter said.
In the letter, Musk also cited the company’s finances as a potential reason for exiting the deal, citing the company’s “deteriorating business and financial prospects” as a separate reason for ending the deal.
Musk argued in the letter to the company that Twitter breached an agreement not to materially change its business after the deal was signed by firing two senior executives in May and making cuts to its hiring team in July. Musk said he didn’t waive the right to do due diligence when he signed off on the deal, and expects Twitter to send more information.
Legal experts said that when he signed the deal, he agreed to buy the company as is.
Musk rocked the social media world in April when he agreed to buy Twitter for $44 billion. He assembled a large group of co-investors and used his personal wealth to obtain the debt needed to complete the deal. But soon after his takeover announcement, a global selloff in tech stocks eroded Musk’s own net worth while making his $54 per share purchase look like a serious overvaluation of Twitter.
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Musk skeptics said he made up the bots argument simply to find a reason to get out of what he now sees as a bad deal. Musk himself knew about Twitter’s spam problem and cited it as one of the reasons he wanted to buy the company in the first place.
Wall Street has been skeptical that Musk will complete the deal for months. Twitter’s stock price is around $37 today, down nearly 30 percent from the $52 it traded on the day it announced the acquisition.
The filing came after The Washington Post reported Thursday that the deal was in serious jeopardy, with one of the co-investors not hearing from Musk’s team for weeks, according to people familiar with the situation who spoke on condition of anonymity to discuss sensitive issues.
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