Billionaire Elon Musk, who recently finds himself more often in the center of scandals than news about business, wants to withdraw from the agreement to buy the social network Twitter, for which he offered $44 billion. Musk’s lawyers have already sent a corresponding letter about the withdrawal of the offer to the company’s legal department and the US Securities and Exchange Commission, notifies CNBC.
In turn, the chairman of the board of Twitter, Bret Taylor, managed to already state that the company still seeks to close the deal at the agreed price and plans to file a lawsuit to enforce the deal.
“We are confident we will prevail in the Delaware Court of Chancery,” writes Taylor.
Shares of Twitter fell about 6% after the announcement of Musk’s plans to terminate the deal.
In a letter obtained by the Securities and Exchange Commission, Skadden Arps attorney Mike Ringler writes that “Twitter has not fulfilled its contractual obligations.”
Ringler alleges that Twitter did not provide Musk with the relevant business information he requested. Musk previously said he wanted to evaluate the social network’s claims that only about 5% of its monetized daily active users (mDAU) are spam accounts.
“Twitter did not provide or refused to provide this information,” Ringler said. “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.”
Ringler also made other allegations in the letter, such as that Twitter violated the merger agreement because it allegedly contained “materially inaccurate statements.” This accusation is allegedly based on a preliminary review of spam accounts on the social network platform using its own methodology. Twitter said it was impossible to count spam accounts based solely on publicly available information, and that a team of experts was running a check that showed a result of 5%.
“While this analysis remains ongoing, all indications suggest that several of Twitter’s public disclosures regarding its mDAUs are either false or materially misleading,” Ringer said.
“Despite public speculation on this point, Mr. Musk did not waive his right to review Twitter’s data and information simply because he chose not to seek this data and information before entering into the Merger Agreement,” Ringer added. “In fact, he negotiated access and information rights within the Merger Agreement precisely so that he could review data and information that is important to Twitter’s business before financing and completing the transaction.”
The lawyer also claims Twitter breached its contractual obligations to obtain Elon Musk’s consent before changing its normal course of business, citing recent layoffs at the company.
While Musk is now officially seeking to exit the deal, the saga is likely far from over.
Under the terms of the deal, Musk agreed to pay $1 billion if he refused. But as Twitter’s chairman noted, the company could try to force Musk to honor his original agreement by suing him for refusal.
Twitter has reason to try to force Musk to comply with its original terms. Shares fell sharply after the board announced it had accepted his offer to buy the company for $54.20 a share. On the day of this announcement, the stock closed the trading day at $51.70 per share. As of the closing of the market on Friday, the value of Twitter shares was $36.81.
According to the letter, Musk is apparently also paying attention to the stock price, “and is considering whether the company’s declining business prospects and financial outlook constitute a Company Material Adverse Effect giving Mr. Musk a separate and distinct basis for terminating the Merger Agreement.”