My1sttoday Finance — Elon Musk terminates his 44 billion dollar deal to buy Twitter, Friday. Setting up a likely legal fight.
In a letter sent to Twitter’s TWTR board on Friday, the Tesla Inc. TSLA chief executive claimed that he was ending the agreement because Twitter would not share requested information with him.
“The world richest person, Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect,” reads the letter, which was filed with the Securities and Exchange Commission.
Ringler claimed that Twitter did not provide Musk with relevant business information he requested, as Ringler said the contract would require. Musk has previously said he wanted to assess Twitter’s claims that about 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.
Musk had agreed to purchase Twitter for $54.20 a share in April, after starting to build a position in the social-media company in January. Twitter shares closed Friday at $36.81, then fell more than 6% in after-hours trading after the letter was made public.
In agreeing to purchase the company, Musk waived due diligence and signed a contract to purchase the company for roughly $44 billion. Since that agreement, as stocks have declined sharply, Musk has asked for more information on bot accounts on the service.
The agreement includes a $1 billion breakup fee for either side, with predetermined reasons for breaking the contract. Twitter could take Musk to court seeking more than the $1 billion fee, up to and including the full $44 billion amount he promised to pay.
