Elon Musk has decided he no longer wants to acquire Twitter, he told the company Friday.
Although he signed a binding merger agreement, Musk said Twitter is in “breach” for allegedly refusing his information requests and making employee changes.
The deal has been tumultuous almost since it was announced in April.
Twitter is vowing to sue Elon Musk in order to force a close of his deal to acquire the company.
“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,” the company said in a press release. “We are confident we will prevail in the Delaware Court of Chancery.”
Board chairman Bret Taylor, also the co-CEO of Salesforce, reiterated that statement on Twitter.
The company’s stance is in line with what it has said in recent weeks, as Musk pushed it for more data and seemed to be creating a scenario to renegotiate the $44 billion price of the deal or back out entirely. Musk began asking for more data from Twitter, which it has said it’s provided, in order to perform his own analysis of “bots” or spam accounts on the platform, which he believes to be more populous on the site than Twitter admits.
Executives have explained to employees during internal meetings and in public statements that it would “enforce” the contract in place with Musk if it had to, meaning heading to court if he attempted to back out. Many employees have been expecting this turn of events since at least June, after Musk first accused the company in a letter of “actively resisting” his information requests.
Such a lawsuit will take place in Chancery Court in Delaware, where Twitter is incorporated. Chancery Court frequently handles major business disputes, but Musk is facing a tough legal battle to get out of the agreement he signed if it is even possible to do so.
“Generally with these kinds of deals, once you’ve signed the contract, absent government intervention or an over-bidder, or some material adverse event between signing and closing, these deals will close,” Brian Quinn, associate professor at the Boston College Law School, told Insider. He added that a claim of a material adverse event a “very hard legal claim to win” as Delaware courts have imposed a very high bar for what can be considered that type of event.
Musk indeed is claiming Twitter’s actions have created a “material adverse effect” on the deal.
In the letter he sent Friday to Twitter’s board and filed with the SEC, Musk again accused the company of refusing to comply with his information requests on users and spam or fake accounts and how it calculates them, but also with a request as to its “financial condition” and a budget for this year.
In addition, he took issue with Twitter’s recent decisions to let go of certain employees and impose a hiring freeze and rescind offers of employment at the same time. Musk’s letter also cited the recent resignations of three executives, saying none of the moves had recieved “consent” from his side.
The company’s actions therefore constitute a material breach of the Merger Agreement,” the letter said.
Musk told Twitter employees directly late last month in his first meeting with them that they should expect layoffs when he took over the company. Many others have decided to leave Twitter because of the acquisition deal with Musk.
By Business Insider
