Elon Musk has notified Twitter that he no longer plans to follow through and purchase the social media company for $44 billion on the basis that they failed to comply with their contractual obligations.
In a Securities and Exchange Commission (SEC) filing published on Friday, Musk’s legal team says Twitter did not provide Musk with the relevant business data to be able to verify their claims on the number of fake or spam accounts on the platform.
“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 filing reads. (via CNBC)
The filing also claims Twitter therefore made “materially inaccurate representations” in the merger agreement.
“While this analysis remains ongoing, all indications suggest that several of Twitter’s public disclosures regarding its mDAUs are either false or materially misleading,” Musk’s lawyer alleges.
While Elon Musk says he is pulling out of the deal, Twitter’s board of directors says they will take legal action against Musk to enforce the merger agreement. Board chairman Bret Taylor tweeted the comments shortly after the filing was published.
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
As Taylor suggests in his tweet, the deal is far from dead and will likely end up in court. According to the terms of the merger agreement, Musk or Twitter would have to pay the other party a $1 billion termination fee if they cancelled the deal.
Musk will claim that due to the material breaches in the contract the terms no longer apply, while Twitter will work to ensure Musk follows through on the deal on the agreed-to terms.
Twitter shares were down about 6% in after-hours trading.
You can read the full SEC filing here.