Elon Musk announced Friday that he will back down on his offer to buy Twitter for $44 billion because the company failed to provide him with enough information about the number of fake accounts.
Twitter immediately fired back, warning that it will sue Tesla’s CEO to enforce the deal.
The potential deal-breaking is just the latest twist in the saga between the world’s richest man and one of the world’s most influential social media platforms, and could spark a titanic legal dispute.
Twitter could have pushed for the $1 billion contract cancellation fee that Musk agreed to pay under these circumstances. Instead, it appears ready to enforce the deal, which the company’s board has already approved and CEO Parag Agrawal has said he wants to see through.
In a letter to Twitter’s board of directors, Musk’s attorney, Mike Ringler, complained that for nearly two months his client has been requesting information to assess the prevalence of “spam or fake” accounts on the social network.
“Twitter has either not provided that information or has refused to do so. Twitter has sometimes ignored Mr. Musk’s requests, sometimes rejected them for reasons that appear to be unjustified, and sometimes has said it has complied even though it has provided Mr. Musk with incomplete or unusable information.
Musk also said the information is critical to Twitter’s financial and business performance, and is required to bring the merger deal to fruition.
In response, Twitter Chairman Bret Taylor tweeted that the board is “committed to completing the transaction at the agreed price and terms” with Musk and “plans to take legal action to enforce the merger agreement.” We are confident that we will win in the Delaware Court of Chancery.”
The Delaware court frequently handles business disputes between the many companies incorporated in the state, including Twitter.
Much of the drama has played out on Twitter itself, where Musk — who has more than 100 million followers — has lamented that the company is not living up to its potential as a platform for free expression.
On Friday, shares of Twitter fell 5% to $36.81, well below the $54.20 Musk had offered to pay. Meanwhile, Tesla shares rose 2.5% to $752.29.
“This is a disastrous scenario for Twitter and its board of directors,” Dan Ives, an analyst at investment firm Wedbush, wrote in a note to investors. He predicted that the social network would wage a lengthy court battle to reinstate the deal or obtain the $1 billion breach fee that was specified in the contract.
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Musk gives up buying Twitter; the company will sue