In an interesting turn of events Elon Musk announced that he will abandon his tumultuous 44 billion offer to buy Twitter.
In response Twitter immediately fired back, saying it would sue the Tesla CEO to uphold the deal.
The likely unraveling of the acquisition was just the latest twist in a saga between the world’s richest man and one of the most influential social media platforms, and it may portend a titanic legal battle ahead.
Twitter could have pushed for a 1 billion breakup fee that Musk agreed to pay under these circumstances. Instead, it looks ready to fight to complete the purchase, which the company’s board has approved and CEO Parag Agrawal has insisted he wants to consummate.
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Why Did Elon Musk Pull Out?
Musk has alleged multiple breaches of the agreement as the reason to pull out of his deal to buy twitter.
Mr Musk said he had backed out because Twitter failed to provide enough information on the number of spam and fake accounts.
In a letter to Twitter’s board, Musk lawyer Mike Ringler complained that his client had for nearly two months sought data to judge the prevalence of “fake or spam” accounts on the social media platform.
“Twitter has failed or refused to provide this information. 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,” the letter said.
Musk also said the information is fundamental to Twitter’s business and financial performance, and is needed to finish the merger.
In response, the chair of Twitter’s board, Bret Taylor, tweeted that the board is “committed to closing the transaction on the price and terms agreed upon” with Musk and “plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.”
Spam accounts are designed to spread information to large numbers of people and manipulate the way they interact with the platform. On Thursday, Twitter said it removed around 1 million such accounts each day.
Mr Musk believes that spam or bot accounts could account for 20% or more of Twitter users.
On Friday, shares of Twitter fell 5% to 36.81, well below the 54.20 that Musk had offered to pay. Shares of Tesla, meanwhile, climbed 2.5% to 752.29.
Is Twitter Hiding Something?
“This whole process has been bizarre,” said Christopher Bouzy, founder of research firm Bot Sentinel, which tracks fake Twitter accounts used for disinformation or harassment. “He knew about this problem. It’s odd that he would use bots and trolls and inauthentic accounts as a way of getting out of the deal.”
On the other hand, Bouzy said, the letter from Musk’s legal team makes some valid critiques of Twitter’s lack of transparency, including its apparent refusal to provide Musk with the same level of internal data it offers some of its big customers.
“It just seems as if they’re hiding something,” said Bouzy, who also believes the number of fake or spam Twitter accounts is higher than what the company has reported.
Musk’s lawyer also alleged that Twitter broke the agreement when it fired its revenue product leader and general manager of consumers and laid off a third of its talent-acquisition team.
The sale agreement, he wrote, required Twitter to “seek and obtain consent” if it deviated from conducting normal business. Twitter was required to “preserve substantially intact the material components of its current business organization,” the letter said.