Tesla CEO Elon Musk announced on Friday that he was terminating his $44 billion deal with Twitter, citing the social media company’s failure to provide information about fake accounts on the platform.
Twitter’s stock dropped 6% in extended trading.
Musk’s lawyers stated in a filing that Twitter failed or refused to respond to multiple requests for information on fake or spam accounts on the platform, which is critical to the company’s business performance.
According to the filing on Friday, “Twitter is in material breach of multiple provisions” of the buyout agreement, and the company “appears to have made false and misleading representations on which Mr. Musk relied when entering into the Merger Agreement.”
“For nearly two months, Mr. Musk has sought the data and information required to “make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform,” Musk’s law firm Skadden Arps wrote to Twitter.
“Twitter has failed to provide or has refused to provide this information.” Twitter has sometimes ignored Mr. Musk’s requests, sometimes rejected them for reasons that appear to be unjustified, and sometimes claimed to comply while providing Mr. Musk with incomplete or useless information.”
Twitter’s chairman, Bret Taylor, responded by saying the social media giant is prepared to sue Musk in court.
“The Twitter Board is committed to closing the transaction at the agreed-upon price and terms with Mr. Musk and plans to pursue legal action to enforce the merger agreement,” Taylor said in a tweet Friday afternoon. “We are confident in our ability to prevail in the Delaware Court of Chancery.”
Musk acknowledged in the Friday filing that Twitter has provided some information, but not as much as it does for its largest advertisers.
“While Twitter has provided some information, it has come with strings attached, use limitations, or other artificial formatting features, rendering some of the information only marginally useful to Mr. Musk and his advisors.”
Musk also claims that the recent round of layoffs at Twitter required his approval.
The announcement is the latest twist in a will-he-won’t-he saga that began in April when the world’s richest person agreed to buy Twitter for $44 billion but then put the deal on hold until the social media company proved that spam and bot accounts accounted for less than 5% of users who saw advertising on the social media service.
Twitter granted Musk access to its “firehose,” a repository of raw data on hundreds of millions of daily tweets, last month.
The terms of the agreement require Musk to pay a $1 billion break-up fee if the transaction is not completed.
The decision will almost certainly result in a lengthy legal battle between the billionaire and the 16-year-old San Francisco-based company.
Insiders believe Musk is attempting to back out of the deal because he is now paying a hefty premium for the company as a result of the tech stock correction.
Twitter’s firing of two key, high-ranking employees, its Revenue Product Lead and General Manager of Consumer, as well as its announcement on July 7 that it was laying off a third of its talent acquisition team.