Billionaire Elon Musk wants to end his $44 billion deal to buy Twitter, according to a letter an attorney sent on his behalf to the company’s chief legal officer on Friday.
Twitter shares are down about 7% after the close on Friday.
In the letter, which was released in a filing with the Securities and Exchange Commission, Skadden Arps attorney Mike Ringler accused “Twitter of failing to meet its contractual obligations.”
Ringler claimed that Twitter failed to provide Musk with relevant business information that he requested, as Ringler said the contract would require it. Musk has previously said he wants to evaluate Twitter’s claims that about 5% of its monetizable daily active users (mDAUs) are spam accounts.
“Twitter failed or refused to provide this information,” Ringler claimed. “Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has refused them for seemingly unjustified reasons, and sometimes it has claimed to do so while giving Mr. Musk incomplete or unusable information.”
In the letter, Ringler also accused Twitter of violating the merger agreement because it allegedly contained “materially inaccurate representations.” This allegation is based on Musk’s own preliminary review of spam accounts on Twitter’s platform. Twitter has stated that it is not possible to calculate spam accounts solely from public information and that a team of experts is conducting a check to reach the 5 percent figure.
“While this analysis is ongoing, all indications are that several of Twitter’s public disclosures regarding its mDAUs are either false or materially misleading,” Ringer claimed.
He also claimed Twitter had breached its obligations under the agreement to seek Musk’s approval before changing its normal course of business, noting recent layoffs at the company.
While Musk is now officially trying 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 resigns. But Twitter could still try to keep Musk on his original deal or get a bigger payout by suing him for walking away if they deny his reasoning was intended to let him out of the contract.
Twitter has every reason to try to hold Musk back to his original terms. The stock has fallen significantly since the board announced it had accepted its offer to buy the company for $54.20 per share. On the day of this announcement, the stock ended trading at $51.70 per share. Twitter stock closed at $36.81 on Friday.
Twitter did not immediately respond to a request for comment.
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