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Tesla CEO Elon Musk has formally informed Twitter that he is closing the $ 44 billion bid to buy the social media platform. “Twitter is essentially a breach of several provisions” in the agreement, Musk’s lawyer explained.
Tesla and Spacex CEO Elon Musk’s lawyer sent a letter to Twitter Inc. on Friday regarding Musk’s offer to buy the social media platform. The letter, filed with the US Securities and Exchange Commission (SEC), states:
Mr. Musk terminates the merger agreement because Twitter is in material breach of several provisions of that agreement.
The letter claims that Twitter “gave false and misleading representations” and Musk trusted them when he signed the merger agreement between Twitter and his companies: X Holdings I Inc. and X Holdings II Inc.
The lawyer explained that Twitter has not complied with its contractual obligations to provide the necessary data to Musk.
For almost two months, Musk has been searching for data and information necessary to “make an independent assessment of the prevalence of fake or spam accounts on the Twitter platform,” the lawyer described and elaborated:
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 providing Mr. Musk with incomplete or useless information.
The letter acknowledges that Twitter has provided some information. But “this information has come with strings attached, usage restrictions or other artificial formatting features, which has made some of the information minimally useful to Mr. Musk and his advisers,” it noted.
In early June, Musk’s lawyer informed Twitter of the material breach and warned that Musk could terminate the agreement. “Any cure period given to Twitter under the merger agreement has now expired,” the lawyer noted.
Musk’s lawyer further claimed that Twitter provided “significantly inaccurate representations”, especially regarding the social media company’s claim that “less than 5%” of mDAUs are fake accounts or spam accounts. Twitter defines “revenue-generating daily active use or users (mDAU) as Twitter users who logged in and opened Twitter on any given day through Twitter.com or Twitter applications capable of displaying ads.”
Based on Musk’s own preliminary analysis:
All indications are that several of Twitter’s public revelations regarding mDAUs are either false or significantly misleading.
In addition, “Twitter’s disclosure that it stops counting fake or spam users in its mDAU when it determines that these users are fake appears to be fake,” the lawyer said.
The letter further notes that Twitter deviated from its commitment to “preserve substantially intact the material components of its current business organization.” Since the agreement with Musk was signed, the social media company fired important, senior employees and announced on July 7 that they are laying off a third of the team for talent acquisition. In addition, three leaders have resigned.
Musk’s lawyer noted that Twitter did not agree to these changes, and claimed that the company’s actions further constitute a significant breach of the merger agreement with the Tesla CEO.
The letter concludes:
For all of these reasons, Musk X Holdings I, Inc. hereby exercises the right to terminate the merger agreement and abandon the intended transaction.
Musk and Twitter originally agreed on a $ 1 billion termination fee when the deal was signed. However, the charge of material breach and any subsequent lawsuits may complicate the fee.
Bret Taylor, a board member on Twitter, tweeted on Friday in response to Musk terminating the merger agreement:
The Twitter Board is committed to terminating the transaction on the price and terms agreed with Mr. Musk and plans to pursue legal action to enforce the merger agreement.
He added: “We are confident we will win in the Delaware Court of Chancery.”
What do you think about Elon Musk terminating the merger agreement with Twitter? Let us know in the comments section below.
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