In a
filing to US Securities and Exchange Commission (SEC), 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.
“Musk is terminating the merger agreement because Twitter is in material breach of multiple provisions of that agreement, appears to have made false and misleading representations upon which Musk relied when entering into the merger agreement, and is likely to suffer a Company Material Adverse Effect,”
stated the filing.
Twitter chairman Bret Taylor took to the microblogging site and said the company’s board plans 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 and plan… https://t.co/09YGPGCbne
— Bret Taylor (@btaylor) 1657317108000
“The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Musk. We are confident we will prevail in the Delaware Court of Chancery,” Taylor said in his tweet.
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According to the terms of the deal, Musk will have to pay a $1 billion break-up fee in case he does not complete the transaction.
Shares of Twitter Inc were down a little over 5% at the time of filing this report.
The deal was called off a
day after a report in the Washington Post – citing an anonymous source – said Musk’s team was preparing for a “change in direction” hinting at a potential termination of the deal as Musk was unable to pin down the percentage of Twitter accounts that were not genuine, despite being given access to internal data.
Previously, Musk had expressed misgivings and even implied he could walk away from the deal over concerns about what he believes are an abundance of fake accounts.
“Twitter has not complied with its contractual obligations. For nearly two months, Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform’,” the
SEC filing noted.
“This information is fundamental to Twitter’s business and financial performance and is necessary to consummate the transactions contemplated by the merger agreement because it is needed to ensure Twitter’s satisfaction of the conditions to closing, to facilitate Musk’s financing and financial planning for the transaction, and to engage in transition planning for the business.”
According to the
filing, Twitter either ignored Musk’s requests, or rejected them for reasons that were unjustified, or claimed to comply while giving Musk incomplete or unusable information.
Last month, Twitter granted Musk access to its “firehose”, a repository of raw data on hundreds of millions of daily tweets.
“The Twitter soap opera is clearly coming to some sort of finale over the coming months as Musk makes the decision to stay (with a lower price) or go,” Wedbush analyst Dan Ives had said in a note to investors.
During the Qatar Economic Forum last month, Musk said
his Twitter purchase remained held up by “very significant” questions about the number of fake users on the social network.
“So, we are still awaiting resolution on that matter and that is a very significant matter,” the Tesla car and SpaceX exploration chief had said via a video link to the gathering.
