(CNN) — Elon Musk wants to terminate the agreement for US$44 billion to buy Twitterthe latest in a dizzying process in which Tesla’s billionaire CEO became the company’s majority shareholder, turned down a board seat, agreed to buy the social media platform and raised questions regarding going ahead with the deal. The next chapter in the saga is almost certain to be a court battle.
Musk claimed in a letter to Twitter’s chief lawyer that it is terminating the deal because Twitter is “in material breach of multiple provisions” of the original deal, which was signed in April, according to a regulatory filing.
Musk has for weeks expressed concern, with no apparent evidence, that there are a greater number of bots and spam accounts on the platform than Twitter has publicly said.
Analysts have speculated that the concerns may be an attempt to create a pretext to get out of the deal that it may now see as too expensive, following shares of Twitter and the broader tech market have declined in recent weeks. Tesla shares, which Musk planned to rely on in part to fund the deal, have also dropped sharply since he agreed to the deal.
“Twitter’s board is committed to closing the transaction at the price and terms agreed with Mr. Musk and plans to take legal action to enforce the merger agreement,” he said in a tweet Twitter Chairman of the Board Bret Taylor on Friday, echoing earlier statements from the company. that he planned to go through with the deal. “We are confident that we will prevail in the Delaware Court of Chancery.”
Twitter shares fell almost 6% in following-hours trading on Friday immediately following the news, following ending the day down 5%. Tesla shares gained more than 1% in following-hours trading.
Musk said in May that the deal was “on hold” while assessing the amount of spam and fake accounts on the platform, a reversal of his earlier statements that he wanted to acquire Twitter to root out bots on the platform. Last month, he directly threatened to back out of the deal, accusing Twitter of violating the merger agreement by failing to provide the data he says it needed to assess the amount of spam and fake accounts on the platform. In response, Twitter agreed to hand over its stream of tweets.
Still, Musk’s attorney alleged in Friday’s letter that Twitter “has failed to meet its contractual obligations” to provide Musk with sufficient data, saying Twitter “appears to have made false and misleading representations on which the Mr. Musk” when accepting the deal.
“For nearly two months, Mr. Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on the Twitter platform,'” the Friday letter says. “This information is critical to Twitter’s business and financial performance and is necessary to consummate the transactions contemplated in the Merger Agreement.”
It continues: “Twitter has failed or refused to provide this information. Twitter has sometimes ignored Mr. Musk’s requests, sometimes rejected them for reasons that appear unjustified, and sometimes claimed to comply while providing Mr. Musk with incomplete or unusable information.”
This is a developing story.
