Elon Musk, the world’s richest man, bought Twitter for $44 billion less than three months ago. He declared that the firm has “tremendous potential.”
Mr Musk has since altered his tune. He took shots at Twitter’s senior executives. He sent out tweets mocking the company’s board of directors. He claimed that there were too many spam accounts on the social networking service and that he couldn’t receive any answers. To convey his disgust, he tweeted a faces emoji.
Musk stated in a filing with the US Securities and Exchange Commission (SEC) that he wished to end the arrangement because Twitter was in “material violation” of their agreement and had made “false and misleading” comments during talks.
Meanwhile, the social media corporation has stated that it intends to take legal action to enforce the agreement.
Musk’s decision to back out of the agreement is the latest twist in a long-running controversy that began when he tried to purchase Twitter in April.
Why Musk is backing out of the deal
Musk claims that Twitter has failed to give him crucial information on the number of false or spam accounts on its network, a concern he addressed in May. At the time, he stated the agreement was “temporarily on hold” until he got statistics from Twitter, which claimed that spam and bot accounts constituted fewer than 5% of its total users.
Musk’s legal team stated in a statement with the US Securities and Exchange Commission that “for almost two months, Mr Musk has requested the data and information necessary to make an independent evaluation of the incidence of phoney or spam accounts on Twitter’s platform… Twitter has either failed to give this information or has refused to do so. Twitter has sometimes disregarded Mr Musk’s demands, sometimes rejected them for reasons that appear to be unwarranted, and occasionally pretended to comply while providing Mr Musk with inadequate or useless information.”
Musk also stated that he was leaving because Twitter terminated senior executives and a third of its talent acquisition team, in violation of Twitter’s requirement to “maintain substantially intact the material components of its present business organisation.”
While these are the two primary reasons Musk has given the SEC for cancelling the agreement, a variety of other considerations may have played a part in his decision. To begin with, since the announcement of the transaction, global tech markets have seen a significant fall. On Friday, Twitter’s shares ended at $36.81 on the New York Stock Exchange, down from $51.70 on April 25 when the firm accepted Musk’s offer, a drop of about 29%. Since the announcement of the merger, Tesla’s stock price has dropped by more than 24%.
What will happens next
Musk and Twitter may be in for a long legal struggle, as the social media network has stated that it would take legal action to enforce the terms of the agreement.
“The Twitter Board is dedicated to concluding the acquisition at the agreed-upon price and terms with Mr Musk and intends to take legal action to enforce the merger agreement.” Twitter’s chairman, Bret Taylor, stated, “We are optimistic that we will succeed in the Delaware Court of Chancery.” A $1 billion breakup fee is also included in the original merger deal.
According to Reuters, contentious mergers and acquisitions that wind up in Delaware courts usually result in the parties renegotiating the agreement or the acquirer paying the target a settlement to walk away, rather than a judge mandating that the transaction be completed.
Musk announced on May 14 that the Twitter acquisition was “temporarily on hold,” citing concerns about phoney and spam accounts on the network.
Despite Agrawal’s reply that less than 5% of its users are spam or fraudulent accounts, Musk stated that the purchase “cannot proceed forward” unless false account proof is provided.