By John Ikani
Billionaire Elon Musk wants to end his $44 billion deal to buy Twitter, according to a filing to the Security and Exchange Commission (SEC) on Friday.
Musk lawyers accused Twitter of making “false and misleading representations” about the prevalence of fake accounts on its platform.
They said the company has not complied with its obligations to share data and information that he says he needs to evaluate its business.
“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,” the filing reads.
“Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement,” it also said.
Musk is apparently paying attention to the stock price, too, according to the letter, “and is considering whether the company’s declining business prospects and financial outlook violates the agreement.
The filing also said Musk was walking away because Twitter fired high-ranking executives and one-third of the talent acquisition team, breaching Twitter‘s obligation to “preserve substantially intact the material components of its current business organization.”
It was referring to recent moves which saw Twitter’s chief executive Parag Agrawal impose a recruitment freeze, fired two senior members of staff and this week announced that the company was laying off a third of its talent acquisition team.
But Twitter’s board chair Bret Taylor said the company is still committed to closing the deal at the agreed-upon price and plans to pursue legal action to enforce the agreement.
“We are confident we will prevail in the Delaware Court of Chancery,” added Taylor, referring to the popular venue for business litigation.
Whichever side breaks the agreement could be on the hook for a $1 billion fee.
All signs point to Twitter aggressively defending its position in court, according to a person with knowledge of the company’s thinking. Twitter has fully responded to all of Musk’s requests for information and doesn’t believe it has breached the merger agreement, the person said. The individual was granted anonymity to discuss internal company dynamics.
The move is the latest twist in a dramatic saga that began when Musk first revealed he had taken a stake in Twitter in early April, with a view to reinstating a “free speech” ethos on the platform, tackling spam and reinvigorating growth.
Weeks later Musk sent shockwaves through Wall Street when he announced his bid to take over Twitter at a price of $54.20 per share, which the company eventually accepted.
Twitter‘s shares surged after Musk took a stake in the company in early April, shielding it from a deep stock market sell-off that slammed other social media platforms.
But after he agreed on April 25 to buy Twitter, the stock within a matter of days began to fall as investors speculated Musk might walk away from the deal. With its tumble after the bell on Friday, Twitter was trading at its lowest since March.
He subsequently said the deal was “temporarily on hold” because of doubts over whether Twitter had accurately represented the number of bots and spam accounts.
Some employees expressed disbelief and exhaustion on Friday, publicly posting memes on Twitter, such as of a rollercoaster ride and a baby screaming into a phone, in apparent commentary on the breakup.
Employees have been worried about the deal will mean for their jobs, pay and ability to work remotely, and many have expressed skepticism about Musk’s plans to loosen content moderation.
