Elon Musk’s lawyer sent Friday a letter to Twitter’s chief legal officer saying he wants to end his agreement to purchase the social media platform in a $44 billion deal. Twitter’s board chairman Bret Taylor answered on the platform saying the company is “committed to closing the transaction on the price and terms agreed” adding that plans to pursue legal action in the Delaware Court of Chancery. As of the time of writing, Twitter shares are down 6.47% after hours.
“We refer to the Agreement and Plan of Merger by and among X Holdings I, Inc., X Holdings II, Inc., and Twitter, Inc. dated as of April 25, 2022 and our letter to you dated as of June 6, 2022. As further described below, 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 (as that term is defined in the Merger Agreement),” the letter said.
Twitter acquisition by Tesla’s CEO was seen since the beginning as risky by Tesla shareholders, especially due to Musk’s $6.25 billion loan backed with Tesla stock.
In early June, Musk had asked Twitter for more information on SPAM accounts believing that the social media platform is actively thwarting information rights.. On the form, Musk reiterated his request for certain data needed in order to calculate the evaluation of Twitter’s spam and fake accounts.
On May 13, Elon Musk tweeted that the $44 billion Twitter deal was “temporarily on hold” due to pending details regarding the percentage of spam/ fake accounts. According to Reuters, Twitter estimated in a filing that false or spam accounts represented fewer than 5% of its monetizable daily active users during the first quarter. The social media company had 229 million users who were served advertising in the first quarter.
On the same day Musk announced the intention to buy Twitter, Tesla’s CEO was interviewed for TED Vancouver and said: “I’m not sure that I will actually be able to acquire it. And I should also say, the intent is to retain as many shareholders as is allowed by the law. I could technically afford it”. As Tesla’s CEO said various times during the last weeks, removing the fake accounts was one of his priorities when acquiring Twitter.