ELon Musk wants to scrap the takeover of Twitter. On Friday, he told the online platform through his attorney that he would “terminate the merger agreement.” The letter was filed with the US Securities and Exchange Commission in the evening. In it, Twitter is accused of violating several clauses in the purchase agreement. The company made “false and misleading statements” on which Musk relied.
Twitter does not want to simply accept the withdrawal and immediately threatened legal action. Bret Taylor, who heads Twitter’s board of directors, tweeted that the company is confident of prevailing in court. The company wants to implement the transaction with Musk on the agreed terms.
Specifically, the lawyer’s letter cites concern about the number of “spam” or “fake” accounts on Twitter that do not have real users behind them – a topic Musk has been talking about for weeks. Twitter says their share of reported user data is less than 5 percent. Musk has publicly cast doubt on this, suggesting the number could be much higher. The letter now states that this information is “fundamental” to Twitter’s business. Musk has been trying to get fake account data from Twitter for nearly two months, but the company has not provided it. “Sometimes Twitter has ignored Mr. Musk’s requests,” it says, for example. Twitter, however, insists that it has provided correct information and only this week repeated to journalists that the proportion of fake accounts is well below 5 percent.
News of Musk’s withdrawal sent Twitter’s share price down another 8 percent to below $34 in after-hours trading on Friday night. It had already fallen in regular trading after the Washington Post reported the transaction was in “serious jeopardy”: The price is now a long way from the $54.20 deal negotiated with Musk, for a grand total of $44 billion is equivalent to.
Musk agreed to buy Twitter in April, but began publicly questioning it after a few weeks. He declared the purchase agreement “temporarily suspended” and, citing bogus user accounts, claimed he had the right to cancel it altogether. Many observers considered the reasoning to be false and saw it as a maneuver to get out of the contract or at least negotiate a lower price.
The general economic environment has clouded over since the acquisition was agreed, and shares in technology companies in particular have lost significant value. Musk’s wealth, which is primarily linked to shares in the electric car manufacturer Tesla he runs, has also melted.
Musk has of course concluded a binding purchase agreement from which he cannot easily withdraw. He and Twitter have negotiated penalties of $1 billion each if either side derails the transaction, but those clauses only apply in certain circumstances. In the past few weeks, Twitter has always put itself in the position of wanting to implement the takeover as agreed.