Elon Musk wants to back out of his attempt to buy Twitter, citing multiple problems with the $44 billion deal.
Musk’s lawyers accused Twitter of misleading him about the nature of the company and the purchase.
Twitter “appears to have made false and misleading statements relied upon by Mr. Musk in entering into the Merger Agreement,” lawyers said in a filing with the US Securities and Exchange Commission (SEC).
The deal between Twitter and Mr. Musk included a breakup fee of $1 billion that the billionaire had to pay if the deal did not go through. But documents from Mr. Musk’s legal team appear to indicate that he considers the agreement invalid.
But Twitter suggested it believed the agreement still stood – and that it would require Mr Musk to continue with it.
“Twitter’s board is committed to closing the transaction at the price and terms agreed upon with Mr. Musk and plans to take legal action to enforce the merger agreement,” Brett Taylor, Twitter’s chairman, tweeted. “We are confident that we will prevail in the Delaware Court of Chancery.”
Mr. Musk has repeatedly said that Twitter executives hid the full extent of bots and automated accounts on the platform. Twitter said they accounted for less than 5 percent of active users — a number Mr. Musk said he would not believe until he could verify for himself.
“For nearly two months, Mr. Musk sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on the Twitter platform,'” the filing continued.
“Twitter has been unable or unwilling to provide this information. Twitter has sometimes ignored Mr. Musk’s requests, sometimes rejected them for reasons that appear unwarranted, and sometimes claimed to comply by giving Mr. Musk incomplete or unusable information.
The lawyers said Mr. Musk had asked for detailed information about how Twitter finds spam and fake accounts and suspends them, as well as more details about how it works with its daily active users.
Almost the entire letter focuses on these problems with fake and spam accounts. But Twitter is also said to have changed its business significantly since Mr Musk made the offer to buy it – pointing to the sacking of a number of senior staff in recent weeks.
Mr. Musk uses his own Twitter account to comment on the progress of the acquisition throughout. But the announcement came after a notable absence of updates on the deal from his account – and on Friday, Mr Musk was sharing The Host and SpongeBob SquarePants memes, as well as his excitement about his other companies.
The planned acquisition of Twitter began in January, when Musk began increasing his stake in the company. In April, it was revealed that he had bought enough to become the largest shareholder in the company.
Soon after, he agreed to join Twitter’s board and then immediately backed out again. Instead, he made an offer to buy the entire company — and by the end of April, Twitter accepted.
In May, however, Mr Musk said the deal was “frozen” and linked to a report about Twitter’s exposure of fake accounts. “Deal with Twitter temporarily on hold pending details supporting estimate that spam/fake accounts indeed represent less than 5% of users,” he tweeted.
Since then, the deal appears to have stalled, with Mr Musk threatening to withdraw and demanding more information about these fake accounts. In recent days, information has begun to circulate that the deal may fall through.
On Friday, Mr. Musk’s lawyers filed the letter with the SEC, addressed to Twitter’s chief legal officer Vijay Gade, formally canceling the merger agreement between the billionaire and the social network.
Shares in both Twitter and Mr. Musk’s own Tesla have been trading lower during the deal talks. This led to speculation that Mr Musk could find a convenient way out of the deal, given that the terms would now require paying significantly more than Twitter’s stock market value.
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