After weeks of telegraphing the move, Elon Musk is officially attempting to walk away from his $44 billion deal to buy Twitter and take it private.
“Mr. Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement [and] appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement,” writes Musk’s legal team in a letter to Twitter chief legal officer Vijaya Gadde. The missive, also filed with the Securities and Exchange Commission, came late on a summer Friday afternoon.
As stated in the letter, Musk’s complaints relate to his demand that Twitter supply him with various kinds of user data so that he could perform his own investigation of Twitter’s bot problem. Twitter provided some data, but said it couldn’t provide all the data requested because of user privacy concerns.
Musk agreed to buy Twitter for a price of $44 billion on April 25, a sum that many saw as very generous given Twitter’s struggles to grow its user base and revenue. And that was before tech stocks began tanking in May. Twitter’s stock sold for $51.70 on the day the deal was announced but had fallen to $36.81 per share by Friday’s close.
Now it seems likely that the Musk-Twitter saga will play out in the courtroom. Even if Musk proves that Twitter materially broke elements of the sale agreement, he may be on the hook for $1 billion in breakup fees. And the consensus among legal experts is that Musk’s complaints don’t meet the bar set by the agreement, which said that the deal must go forward, barring any major changes to Twitter’s business.
“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,” tweeted Twitter chairman Bret Taylor in response to Musk’s letter. “We are confident we will prevail in the Delaware Court of Chancery.”