A messy legal battle is brewing after Elon Musk announced he was ending his deal to buy social media platform Twitter, citing an irreconcilable disagreement with the company over fake accounts and spam.
The world’s richest man previously accused Twitter of ‘resisting and thwarting’ his attempts to access information about fake accounts, saying the deal could not progress until the issue was resolved .
Musk claims that up to 20% of Twitter’s 229 million users could be fake. The company itself insists that the real figure is around 5%.
“Musk is terminating the merger agreement because Twitter is in material breach of several provisions of that agreement, (and) appears to have made false and misleading statements, upon which Musk relied in entering into the merger agreement. merger,” attorneys for the CEO of Tesla and SpaceX said. wrote in a letter to Twitter.
Shares of Twitter fell 6% in extended trading on Friday as weeks of speculation that the deal was in jeopardy continued to grow.
In response to Musk’s attempted takedown, Twitter Chairman Bret Taylor signaled that the company would go to court in an effort to force him into the deal.
“Twitter’s board of directors is committed to completing the transaction at the price and terms agreed to with Musk and plans to pursue legal action to enforce the merger agreement,” Taylor wrote in a post on social media, retweeted by Twitter CEO Parag Agrawal.
“We are confident that we will prevail in the Delaware Court of Chancery.”
Meanwhile, an anonymous Twitter employee told NBC News that Musk’s decision felt like some sort of victory.
“I guess we feel like we’ve won. But it feels like the end of the movie, where the characters are bloodied and scruffy with a Michael Bay explosion behind them,” the worker said.
“We could see it happening, but in the meantime he destroyed the business.”
The New York Times reports that an internal memo has been sent to Twitter employees asking them to refrain from public or private comment.
“As this is an ongoing legal matter, you should refrain from tweeting, releasing or sharing any comments on the merger agreement,” the company’s general counsel wrote.
The reason for Musk’s withdrawal
In their letter, addressed to Twitter’s chief legal officer, Vijaya Gadde and revealed by a filing with the United States Securities and Exchange Commission, Musk’s lawyers argued that the company had failed in its obligation to provide him with the information requested “for any reasonable business purpose related to the completion of the transaction”.
“Twitter failed to meet its contractual obligations. For nearly two months, Musk researched the data and information needed to ‘make an independent assessment of the prevalence of fake accounts or spam on the Twitter platform.’ are fundamental to Twitter’s business and financial performance and is necessary to complete the transaction,” wrote attorney Mike Ringler.
“Twitter failed or refused to provide this information. Sometimes Twitter ignored Musk’s requests, sometimes it rejected them for reasons that seem unjustified, and sometimes it pretended to comply while giving Mr. Musk incomplete or unusable information.”
He said Musk made “numerous follow-up requests” aimed at “filling in the gaps in the comprehensive information provided by Twitter.”
Rumors swirled this week suggesting Elon Musk was trying to walk away from his deal to buy Twitter. Photo/Getty Images
“In short, Twitter has not provided the information requested by Musk for nearly two months despite his repeated and detailed clarifications intended to simplify Twitter’s identification, collection and disclosure of the most relevant information sought.
“As Twitter has been notified of its breach (of the merger agreement) since at least June 6, any remedy period afforded to Twitter under the agreement has now expired. Accordingly, Musk hereby exercises (its) right to terminate the Agreement and abandon the transaction contemplated therein.”
Musk announced his intention to buy Twitter in April, offering to acquire all of its outstanding common stock for US$54.20 ($87.50) per share.
Earlier in the month he bought a 9.2% stake in the social media company, making him the largest individual shareholder.
Twitter chief executive Parag Agrawal later revealed that Musk had declined an offer to join the company’s board – a move that would have prevented him from acquiring more than 14.9% of the company’s shares. company – sparking the first wave of takeover speculation.
“I invested in Twitter because I believe in its potential to be the platform for free speech around the world, and I believe that free speech is a societal imperative for a functioning democracy” , Musk said in a letter to Twitter’s board regarding his proposed purchase.
“However, since making my investment, I now realize that the business will not thrive or serve this societal imperative in its current form. Twitter needs to be transformed into a private enterprise.
“As a result, I am offering to buy 100% of Twitter for $54.20 per share in cash, a premium of 54% from the day before I started investing in Twitter and a premium of 38% compared to the day before my investment was publicly announced.
“My offer is my best and last offer and if it is not accepted, I will have to reconsider my position as a shareholder. Twitter has extraordinary potential. I will unlock it.”
Twitter’s board agreed to the deal after Musk unveiled a funding plan that included $21 billion of his personal fortune. But the billionaire announced he was suspended on May 13, citing a desire to get more information about spam accounts.
Agrawal posted a social media thread at the time explaining the company’s position on the matter. Musk responded with a poo emoji.
Elon Musk. Photo/Getty Images
Musk, who has become one of Twitter’s most powerful users, with his posts regularly causing stock markets and cryptocurrencies to swing wildly, has become a vocal critic of the platform’s business practices and in particular its content moderation policies.
Since taking a major stake, he has needled Twitter and its employees with a series of provocative messages, apparently creating major anxiety within the company and prompting executives to give staff a scheduled “day off”. .
In one, he created a poll asking if Twitter’s San Francisco headquarters should be converted into a “homeless shelter since no one is showing up anyway.”
More than 91% of respondents, or 1.9 million people, answered “yes”.
He also approvingly shared a video of legendary activist investor Carl Icahn recounting how he “fired 12 floors of people” after taking over a company early in his career.