Tesla CEO Elon Musk said on Friday that he is ending his $44 billion deal for Twitter, saying the social media company has failed to provide information about fake accounts on the platform.
Twitter shares fell 6% to $34.58 in extended trading.
The stock had risen to $51.70 when Musk made an offer of $54.20 to buy the social media giant on April 25.
In a filing, Musk’s lawyers said Twitter failed or refused to respond to multiple requests for information on fake or spam accounts on the platform, which is fundamental to the company’s business performance.
Friday’s filing claimed that “the Twitter buyout is in material breach of several provisions of the deal” and that the company has made “false and misleading representations that Mr. Musk relied on when he entered into the merger agreement.”
“For nearly two months, Mr. Musk has sought the data and information necessary to conduct an independent assessment of the spread of fake or spam accounts on Twitter’s platform,” Musk’s law firm Skadden Arps said in a letter to Twitter.
“Twitter has failed or refused to provide this information. Sometimes Twitter has ignored Mr Musk’s requests, sometimes it has denied them for reasons that seem inappropriate, and sometimes it has claimed to have complied by giving Musk incomplete or unhelpful information. ,
In response, Twitter President Brett Taylor said the social media giant is ready to take Musk to court.
“The Twitter Board is committed to closing the transaction on the price and terms agreed with Mr. Musk and plans to take legal action to enforce the merger agreement,” Taylor tweeted Friday afternoon. “We are confident that we will prevail in the Delaware Court of Chancery.”
Musk said he told Twitter on June 6 that he violated the merger agreement by not providing enough information on the fake accounts, according to the filing.
“Since Twitter has been on notice of its breach since at least June 6, 2022, any treatment period granted to Twitter under the merger agreement has now expired,” Musk said.
In Friday’s filing, Musk acknowledged that Twitter provided some information but did not say as much as it does to its biggest advertisers.
“While Twitter has provided some information, that information has come with attached strings, usage limits or other artificial formatting features, which have rendered some of the information minimally useful to Mr. Musk and his advisers.”
Musk has remained silent on his favorite platform since Friday’s shock announcement. The tech titan is expected to speak at Allen & Company’s Sun Valley conference in Idaho on Saturday.
The announcement is another turning point in a will after the world’s richest man secured a $44 billion deal for Twitter in April, but the purchase was put on hold until the social media company proved that spam and Bots used to account for less than 5% of users who see ads on the social media service.
Last month, Twitter allowed Musk to access his “firehose,” a repository of raw data on hundreds of millions of daily tweets.
The terms of the deal would require Musk to pay a $1 billion break-up fee for not completing the transaction.
The decision is likely to result in a prolonged legal dispute between the billionaire and the 16-year-old San Francisco-based company.
Insiders have speculated that Musk is trying to back away from the deal because he is now paying a hefty premium to the company as a result of a tech stock correction.
It was reported Thursday by The Wall Street Journal that Twitter has laid off a third of its talent acquisition team.
In Friday’s filing, Musk claimed that Twitter’s recent round of layoffs needs to be approved by him.
Daniel Ives, an analyst at Wedbush, said Musk’s filing was bad news for Twitter.
“This is a disaster scenario for Twitter and its board as the company will now fight Musk in a protracted court battle to compensate for at least a $1 billion deal and/or breakup charges,” he wrote in a note to customers.
Before the news broke, Twitter CEO Parag Agarwal, who took over as chief executive after stepping down from the role of company co-founder Jack Dorsey, was reportedly “ready to go to war to make this deal happen. “
Agarwal will have to receive a payment of $42 million under the current terms of the buyout. Like some other Twitter executives, Agarwal’s payments will be triggered by a so-called “change of control” clause in their contracts, which terminates if either of them expire within 12 months of new ownership of the company. .