Billionaire Elon Musk has made a move to end his $44 billion deal to buy Twitter.
This is according to a letter sent by a lawyer on Musk’s behalf to Twitter’s Chief Legal Officer on Friday. In the letter, disclosed in a Securities and Exchange Commission filing, Skadden Arps attorney, Mike Ringler, said Tesla’s Chief Executive Officer was exercising his right to terminate the merger agreement and abandon the transaction.
According to the letter, Musk is terminating the merger agreement because Twitter is in material breach of multiple provisions of that Agreement and appears to have made false and misleading representations to him.
Part of the letter read, “While Section 6.4 of the Merger Agreement requires Twitter to provide Mr. Musk and his advisors all data and information that Mr. Musk requests “for any reasonable business purpose related to the consummation of the transaction,” Twitter has not complied with its contractual obligations.
“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 Twitter’s platform” (our letter to you dated May 25, 2022 (the “May 25 Letter”)).
“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 Mr. Musk’s financing and financial planning for the transaction, and to engage in transition planning for the business.
“Twitter has failed or refused to provide this information. 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.”
The letter explained that Musk was pulling out of the deal because Twitter had failed to provide much of the data and information he needed.
The requests include information related to Twitter’s process for auditing the inclusion of spam and fake accounts in monetisable Daily Active Users – information related to Twitter’s process for identifying and suspending spam and fake accounts, daily measures of mDAU for the past eight quarters, board materials related to Twitter’s mDAU calculations, and materials related to Twitter’s financial condition.
It added, “In short, Twitter has not provided information that Mr. Musk has requested for nearly two months notwithstanding his repeated, detailed clarifications intended to simplify Twitter’s identification, collection, and disclosure of the most relevant information sought in Mr. Musk’s original requests.
“While Twitter has provided some information, that information has come with strings attached, use limitations or other artificial formatting features, which has rendered some of the information minimally useful to Mr. Musk and his advisors.”
The letter revealed that Twitter was in breach of Sections 6.4 and 6.11 of the Merger Agreement because it refused to provide information that Musk had been requesting since May 9, 2022.
It stated, “Accordingly, for all of these reasons, Mr. Musk hereby exercises X Holdings I, Inc.’s right to terminate the Merger Agreement and abandon the transaction contemplated thereby, and this letter constitutes formal notice of X Holding I, Inc.’s termination of the Merger Agreement pursuant to Section 8.1(d)(i) thereof.”
Musk might be forced to pay $1 billion if he successfully backs out from the deal because he had agreed to it in the original agreement of the deal. Also, Twitter might hold him to his original deal or get a bigger compensation for the failed deal.
Meanwhile, Twitter’s board chairman Bret Taylor tweeted on Friday that the company is committed to seeing the deal through.
He said, “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.”
This was contained in a regulatory filing on June 21, according to the ABC News.
However, local media, AFP, quoted Musk saying on June 21 that his $44 billion move to take over Twitter remained held up by “very significant” questions about the number of fake users on the social network.
Musk was reluctant to talk about the deal when asked at the Qatar Economic Forum, saying it was a “sensitive” matter.
“There are still a few unresolved matters,” Musk said by video link.
This includes whether “the number of fake and spam users on the system is less than five per cent as per their claims, which I think is probably not most people’s experience when using Twitter.
“So, we are still awaiting resolution on that matter and that is a very significant matter,” the Tesla car and SpaceX exploration chief said.