- Elon Musk announced Friday that he is “canceling” his $44 billion agreement to purchase Twitter.
- The chief of Twitter’s board stated that the company intends to file a lawsuit to force the agreement to be executed.
- In April, Musk and Twitter signed an agreement that any party choosing to back out of the deal would be required to pay a $1 billion penalty.
According to a Securities and Exchange Commission filing, Elon Musk informed Twitter on Friday that he is “terminating” his $44 billion purchase agreement. However, the chairman of Twitter’s board stated the company plans to file a lawsuit to push the purchase through.
Twitter’s board chairman Bret Taylor tweeted that the company is “committed to concluding” the deal and that it would “pursue legal action to enforce the merger agreement.”
In April, Musk and Twitter signed an agreement that any party choosing to back out of the deal would be required to pay a $1 billion penalty.
According to Musk’s lawyer, Mike Ringler, the agreement has been canceled because Twitter hasn’t given Musk enough information regarding the volume of spam and fake accounts that utilize the network.
In a letter to Twitter, Ringler said the company is in “material breaches of legal instruments” of its agreement with Musk by reportedly not giving sufficient information.
After hearing that the acquisition was really in peril on Friday, Twitter’s stock price fell more than 5% to finish at $36.81. It then fell another 6% in after-hours trading to roughly $34.50 after the SEC filing.
An inquiry for comment from Forbes did not receive a prompt response from Musk.
Ringer stated in the letter, that Twitter sometimes ignored Mr. Musk’s demands, rejected them for causes that appear to be unreasonable, and sometimes pretended to comply while providing Mr. Musk with inaccurate or worthless information.
On April 25, Twitter’s board approved Musk’s $44 billion unexpected bid to purchase the company, but on May 13, Musk announced that he was putting the deal “on pause” due to his worries about spam and fake accounts on the network. In response to Twitter’s claim that certain accounts make up fewer than 5% of profiles, Musk voiced doubt about the claim, and his team was dissatisfied with the data Twitter provided to support its claim. According to a story published on Thursday by The Washington Post, the billionaire was expecting to completely change his position on the deal after his staff discovered that Twitter’s statement regarding fake and spam accounts could not be verified. Musk claimed that he wanted to purchase Twitter because he was tired of the moderating practices that, in his opinion, harmed public conversation. As a platform owner, he promised to eliminate restrictions on well-known accounts like that of former President Donald Trump and to permit all speech that is permitted by law on the platform.
WHAT TO LOOK OUT FOR
The news on Friday was called “a terrible scenario for Twitter” by Wedbush researchers Daniel Ives and John Katsingris, who forecast a lengthy court battle on Twitter’s behalf to either push the deal through or compel Musk to pay the $1 billion cancellation penalty. When the markets open on Monday, the experts predict that the stock might trade as low as $25.
$54.20. The April 25 deal priced Twitter shares at that amount, valuing the firm at $44 billion. But over the past three months, the stock has fallen due to worries about the deal and a larger tech selloff. On Friday afternoon, Twitter had a market value of almost $28 billion.