In a nutshell: Elon Musk appears to be making good on his previous threats to walk away from the 44 billion dollar deal to buy Twitter. The SpaceX CEO's legal team filed a letter with securities regulators, claiming the media giant and Musk entered into the purchase agreement based on false and misleading representations. Unfortunately for Musk, Twitter's Board of Directors disagrees and is gearing up for legal actions to hold him accountable for the originally negotiated multi-billion-dollar price tag.
The letter, filed by Musk's legal counsel on Friday, claims Twitter's representatives did not comply with contractual obligations to provide information regarding the prevalence of bots, spam accounts, and other fake accounts across the platform. Musk's legal team representative Mike Ringler says Twitter has ignored requests for information multiple times, provided unjustified rejections to queries, or responded to Musk with incomplete or inaccurate information while claiming they've complied with full disclosure.
Musk's claims that Twitter has not been forthcoming with account-related data is nothing new. The statements stretch back to May when the outspoken CEO stated the buyout was on hold until Twitter provided facts supporting claims in a previously published Reuter article. Musk and his team remain adamant that the information is necessary to conduct a thorough analysis of bots and other fake accounts across the social media platform.
Twitter representatives do not appear to be taking the accusations lying down. Despite the claims that the media platform has been withholding information relevant to the negotiated acquisition, the head of Twitter's Board of Directors, Bert Taylor, was clear that the company would pursue legal action and intended to enforce the previously negotiated acquisition 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 enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.— Bret Taylor (@btaylor) July 8, 2022
While the outcome is yet to be determined, news of Musk's intent already seems to have impacted Twitter's bottom line. Financial data showed stock values dropping between 5% and 6% on the heels of his statements.
There's no legal guarantee that Musk will be allowed to walk away from the already negotiated multi-billion dollar deal. According to the standing agreement, either Twitter or Musk could be liable for a one-billion-dollar break-up fee should either party walk away from the agreed-upon offer.
There are also several other potential outcomes, ranging from a renegotiated purchase price or break-up penalties to another bidder stepping up in an attempt to take over the acquisition. Any guesses as to the outcome will be nothing more than speculation until more information becomes available.