Elon Musk Terminates The Twitter Deal,Faces Legal Threat

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,” Mr. Taylor tweeted.

Billionaire Elon Musk, the chief executive officer of Tesla, steps back from his $44 billion deal to buy Twitter, accusing the company of “misleading” statements about the number of fake accounts according to him, the social media company had breached multiple provisions of the merger agreement.

Twitter’s chairman, Bret Taylor, said the board will pursue legal action to enforce the merger agreement.

 “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,” Mr. Taylor tweeted.“We are confident we will prevail in the Delaware Court of Chancery,” Taylor wrote.

In the letter, disclosed in a Securities and Exchange Commission filing, Skadden Arps attorney Mike Ringler said that “Twitter has not complied with its contractual obligations.” Ringler claimed that Twitter did not provide Musk with the relevant business information he requested.“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 added, “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. 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.”

While Musk is now officially seeking to walk away from the deal, this saga is likely far from over. Under the terms of the agreement, Musk agreed to pay $1 billion if he backs out. But as Twitter’s board chair indicated they would do, the company can seek to hold Musk to his original deal by suing him for walking away if they dispute that his reasoning should let him out of the contract.

Twitter has reason to seek to hold Musk to his original terms. Shares of Twitter were down 6% at $34.58 in extended trading. That is 36% below the $54.20 per share (on the day of the announcement of the deal) , when  Musk agreed to buy Twitter in April. Hence, Musk is apparently paying attention to the stock price too.