Elon Musk, the chief executive officer of Tesla and the world’s richest person, said on Friday he was terminating his $44 billion deal to buy Twitter because the social media company had breached multiple provisions of the merger agreement. The social media giant now plans to take legal action against the Tesla CEO to force the deal to go through.
The announcement is the latest twist in a long-running saga after the world’s richest person decided to buy Twitter in April. Mr. Musk said he had backed out because Twitter failed to provide enough information on the number of spam and fake accounts.
Twitter’s chairman, Bret Taylor, said on the micro-blogging platform that the board planned to pursue legal action to enforce the merger agreement. “The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk…,” he wrote.
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. We are confident we will prevail in the Delaware Court of Chancery.— Bret Taylor (@btaylor) July 8, 2022
In a filing, Musk’s lawyers said Twitter had failed or refused to respond to multiple requests for information on fake or spam accounts on the platform, which is fundamental to the company’s business performance.
“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,” the filing said.
Musk also said he 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.”
Twitter and Musk both agreed in April that if a party chose to withdraw from the deal, they would have to pay a fine of $1 billion. With the SpaceX CEO backing out, Twitter could have pushed for the break-up fee but is instead readying for a pitched battle to complete the purchase.
In the Delaware court, where disputed mergers and acquisitions often land up, the legal battle usually ends up with the companies re-negotiating deals or the acquirer paying the target a settlement to walk away, as per a news agency report.
This had come after Musk said he was putting the deal “temporarily on hold” until Twitter shows proof that bots and spam accounts constitute less than five percent of its daily average users.
Tesla CEO Musk had inked the deal to acquire Twitter in April this year, for $44 billion, at $54.20 a share.
In May, the American magnate had put the deal “temporarily on hold” while he checked the veracity of the company’s claim that spam and fake accounts make up less than 5 percent of users. At the same time, he clarified that he was still committed to the acquisition.
In June, Musk had threatened to walk away from the deal if the company failed to provide data on spam and fake accounts. Soon after that, the social media giant had decided to provide Musk access to its “firehose” of raw data on hundreds of millions of daily tweets.
The contract calls for Musk to pay Twitter a $1 billion break-up if he cannot complete the deal for reasons such as the acquisition financing falling through or regulators blocking the deal. The break-up fee would not be applicable, however, if Musk terminates the deal on his own.
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 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.
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