Tesla and SpaceX CEO Elon Musk has reportedly put his bid to buy the mammoth social media company Twitter on an indefinite pause.
In a letter sent by Musk’s legal team Friday, which was addressed to Twitter’s Chief Legal Officer Viijaya Gadde, the deal was called off due to Twitter breaching multiple sections of the Merger Agreement by not giving Musk essential information regarding the percentage of fake “bot” accounts present on the platform.
In a section detailing Musk’s reasoning for pulling out of the deal, the letter states:
“While Section 6.4 of the Merger Agreement requires Twitter to provide Mr. Musk and his advisors all data and information that Mr. Musk requests “for any reasonable business purpose related to the consummation of the transaction,” Twitter has not complied with its contractual obligations. For nearly two months, Mr. Musk has sought the data and information necessary to “make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform” (our letter to you dated May 25, 2022 (the “May 25 Letter”)). This information is fundamental to Twitter’s business and financial performance and is necessary to consummate the transactions contemplated by the Merger Agreement because it is needed to ensure Twitter’s satisfaction of the conditions to closing, to facilitate Mr. Musk’s financing and financial planning for the transaction, and to engage in transition planning for the business. 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.”
“Mr. Musk and his financial advisors at Morgan Stanley have been requesting critical information from Twitter as far back as May 9, 2022—and repeatedly since then—on the relationship between Twitter’s disclosed mDAU figures and the prevalence of false or spam accounts on the platform,” the letter continued.
Elon Musk’s original deal with Twitter stated that he would still pay $1 billion in the event that he did not make good on the deal, but Twitter’s board of directors appears to have other plans.
Twitter’s board chairman, Bret Taylor, stated that the Twitter board is committed to closing the transaction on the price and terms that Musk legally agreed to.
The reported demise of Elon Musk’s Twitter deal is sure to send shockwaves throughout the Twitter community, as many had previously stated that they would leave Twitter should Musk be successful in purchasing the social media company. On the other hand, this is surely to be seen as a significant defeat to those in favor of Musk’s attempt acquisition of Twitter.
On the contrary, there is speculation that Musk will not have to pay $1 billion despite backing out of the deal. As the letter begins, Twitter appears to have made “false and misleading representations” about their operations when Musk initially entered into the agreement.
Update as of July 11th, 3:38 pm:
Twitter is putting together a high-profile legal team to sue Elon Musk in an attempt to enforce the original deal that would have had Musk acquire Twitter for $44 billion, reported The New York Post.
The law firm reportedly hired by Twitter is Wachtell, Lipton, Rosen & Katz, a high-profile firm known for working with large corporate mergers. Musk has reportedly hired Quinn Emanuel Urquhart & Sullivan, a high-profile firm that he has worked with in the past.
If successful, the lawsuit could force Elon Musk to pay a $1 billion breakup fee, which was part of Musk’s original deal to buy Twitter, should the agreement fail.
The lawsuit is likely to be tried in a chancery court, where a judge will hear the case without a jury.
Editor’s note: This story is still developing. Refresh this page for more updates.