According to a letter a lawyer on behalf of billionaire Elon Musk addressed to the company’s top legal officer on Friday, Musk wants to cancel his $44 billion bid to purchase Twitter.
The acquisition will still be closed at the agreed-upon price, according to Twitter’s board chairman Bret Taylor, and the business plans to take legal action to enforce the contract.
After hours on Friday, Twitter stock was down roughly 6%.
Attorney Mike Ringler of Skadden Arps claimed in the letter, which was made public in a Securities and Exchange Commission filing, that “Twitter has not complied with its contractual duties.”
According to Ringler, the contract would have required Twitter to give Musk the pertinent business information he wanted from them.
Musk earlier declared that he was interested in evaluating Twitter’s assertions that 5% of its monetizable daily active users (mDAUs) are spam accounts.
“Twitter has failed or refused to provide this information,” Ringler claimed. “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.”
Ringler also charged in the letter that Twitter breached the merger agreement because it allegedly contains “materially inaccurate representations.” This accusation is based on Musk’s own preliminary review of spam accounts on Twitter’s platform. Twitter has said it’s not possible to calculate spam accounts from solely public information and that a team of experts conducts a review to reach the 5% figure.
“While this analysis remains ongoing, all indications suggest that several of Twitter’s public disclosures regarding its mDAUs are either false or materially misleading,” Ringer alleged.
“Despite public speculation on this point, Mr. Musk did not waive his right to review Twitter’s data and information simply because he chose not to seek this data and information before entering into the Merger Agreement,” Ringer added. “In fact, he negotiated access and information rights within the Merger Agreement precisely so that he could review data and information that is important to Twitter’s business before financing and completing the transaction.”
He also claimed Twitter breached its obligations under the agreement to get Musk’s consent before changing its ordinary course of business, pointing to recent layoffs at the company.
While Musk is now officially seeking to walk away from the deal, this saga is likely far from over.
