Elon Musk told Twitter on Friday that he is “terminating” his proposed acquisition of the social media company, arguing in a letter that the company was in “breach” of the merger agreement.
Musk’s letter said that he wants out of the deal “because Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect (as that term is defined in the Merger Agreement).”
In turn, Twitter said it will pursue legal action against Musk to ensure the deal goes through at the agreed upon terms.
“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 encore the merger agreement. We are confident we will prevail in the Delaware Court of Chancery,” Bret Taylor, chair of Twitter’s board tweeted Friday.
Specifically, Musk once again said that Twitter did not provide enough information about its bot and spam accounts on the platform, and did not give Musk and his team enough data to conduct their own analysis.
“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,” the Friday letter said. “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.”
And Musk also claimed that some key executive departures at the company, layoffs, and a hiring freeze were all made without first consulting him, which he says is also a breach of the deal.
Per the deal, Musk may also be on the hook to pay a $1 billion breakup fee for walking away from the takeover.
Wedbush analysts called Musk’s decision Friday a “disaster scenario for Twitter,” and predicted that shares of the company would open in the $25 to $30 range Monday morning, saying that the Street is wary of any court battle. Shares of Twitter were down 7 percent in extended-hours trading Friday, after having opened at $37.51.
“From the beginning this was always a head scratcher to go after Twitter at a $44 billion price tag for Musk and never made much sense to the Street,” the analysts wrote. “Now it ends (for now) in a Twilight Zone ending with Twitter’s Board back against the wall and many on the Street scratching their head around what is next.”