Elon Musk informed Twitter Friday he is “terminating” his $44 billion deal to buy the platform, according to a Securities and Exchange Commission filing, but the head of Twitter’s board said the company plans to take up a legal challenge to force the agreement to go through.
Bret Taylor, the chairman of Twitter’s board, tweeted the company “is committed to closing” the deal and plans to “pursue legal action to enforce the merger agreement.”
Musk and Twitter both agreed in April that if a party chose to withdraw from the deal, that party would have to pay a fine of $1 billion.
Musk’s attorney, Mike Ringler, stated the deal is being called off because Musk does not believe Twitter has provided adequate information about how many fake and spam accounts populate the platform.
In a letter to Twitter, Ringler claimed the company is in “material breach of multiple provisions” of its agreement with Musk by allegedly not providing sufficient information.
Twitter’s stock price plunged more than 5% on Friday to close at $36.81 after reports surfaced the deal was in serious jeopardy, before dropping another 6% in after-hours trading to around $34.50 following the SEC filing.
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“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,” Ringer said in the letter.
Twitter’s board accepted Musk’s unsolicited $44 billion offer to buy the company on April 25, but Musk said on May 13 he was putting the deal “on hold” over concerns about fake and spam accounts on the platform. Musk expressed skepticism with Twitter’s claim that such accounts make up less than 5% of profiles, and his team was unsatisfied with data Twitter presented to attempt to back up its assertion. The Washington Postreported Thursday that the billionaire was expected to take a major shift in his approach to the deal after his team determined Twitter’s claim on fake and spam accounts was unverifiable. Musk said he wanted to buy Twitter because he was fed up moderation policies he believed hurt public discourse. He vowed as owner he would allow all speech permissible by law on the platform and lift bans on prominent accounts like former President Donald Trump’s.
WHAT TO WATCH FOR
Wedbush analysts Daniel Ives and John Katsingris called Friday’s news “a disaster scenario for Twitter,” predicting a long legal battle for Twitter to either force the deal through or get Musk to pay the $1 billion termination penalty. The stock could trade as low as $25 when markets open Monday, according to the analysts.
$54.20. That’s how much the April 25 deal valued Twitter shares at, putting the company’s market cap at $44 billion. Concerns over the deal and a broader tech selloff has caused the stock to plunge over the past few months, though. Twitter’s market cap Friday afternoon was around $28 billion.