Elon Musk has made an official attempt to abandon the $44 billion deal to buy Twitter. In a filing with the Securities and Exchange Commission on Friday, Musk and his team alleged Twitter has not been forthcoming about its user data and the way the platform handles spam in what might be a “material breach” of the agreement. The pullout is only the latest dramatic episode in the Musk-Twitter saga. Musk has been sending strong hints that he is no longer interested in buying Twitter only a few days after the deal was signed in April. Also Read - Elon Musk vs Twitter: Social media company to hold shareholder meeting to vote on bid
“For nearly two months, Mr Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform,’” a clause in the regulatory filing reads. “Twitter has failed or refused to provide this information.” Also Read - Twitter says not planning to fire many employees but restructuring underway
Twitter, however, is not in a mood to entertain Musk’s latest bout of “what-ifs”. The microblogging platform is hoping to close the deal and for that, it has challenged Musk that legal action is coming his way soon. “The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr Musk and plans to pursue legal action to enforce the merger agreement,” wrote Twitter board chairman Bret Taylor. “We are confident we will prevail in the Delaware Court of Chancery.” Also Read - Twitter may have better chances at winning against Elon Musk in latest deal fallout
The Musk-Twitter circus
Elon Musk is probably among those few billionaires, or — let us say — visionaries, who spend a better part of their time on Twitter. In his time with Twitter, Musk claimed he discovered the platform is not exactly a safe haven for free speech. He called out Twitter for that several times, and his fans urged him that if he wants to see a change, he should Twitter. Musk being Musk, he cooked up a plan to buy Twitter, but it was revealed in an interesting way. Musk had bought some stakes in Twitter earlier this year without disclosing the terms to the regulators. The Twitter board was apparently not aware unless the estimation of Musk’s stakes in Twitter made him the single largest shareholder.
Concerned about what would Musk do with the authority he had as the top shareholder, the Twitter board resorted to several plans and came up with one. Another stakeholder upped its stake to outmatch Musk’s holdings in the company. Maybe Musk saw it as a challenge. The next thing he did was offer to buy Twitter entirely and take it private. He made a bid of $43 billion to the board, which initially rejected the proposal. But later Twitter CEO Parag Agrawal informed disconcerted employees that the company was reconsidering Musk’s proposal. After a brief period the board spent contemplating, it agreed to the takeover but asked Musk to raise the deal price to $44 billion. It also put across certain conditions, one of which asked Musk to prove he has enough funding to make the deal.
Musk, whose entire takeover bid stands on the free-speech pillar, managed to show he has monetary support from Goldman Sachs, but it was not concrete enough a plan to convince the Twitter board. But the board was hopeful. It signed a deal with Musk for $44 billion, however, with certain clauses. A clause in the deal binds both parties — Twitter and Elon Musk — to pay a termination fee of $1 billion in the event either back out of the deal. For Musk, it meant he would need to pay the termination charges if he failed to secure the funding by the proposed time. Twitter agreed to pay the fee if it found another buyer or if its board members vote against the takeover.
So far Musk could not prove his action plan to secure funding, but he managed to find out problems with Twitter. Shortly after the deal was inked, Musk tweeted that he was putting the deal on hold on the grounds that Twitter has a spam problem and its user data is not correct. Twitter’s Agrawal posted a series of tweets challenging Musk’s stance against the platform and asserted the company was not hiding anything. Musk did not budge.
Since Musk is now claiming Twitter violated the terms of the deal by not giving accurate information about its business. In a way, he is trying to pull out of the deal without having to pay anything because according to him, it is Twitter’s fault the deal collapsed. But the regulatory filing does not mention any breakup fee.
Twitter, on the other hand, said it will pursue legal action against Elon Musk for ditching the deal. This could be the beginning of an ugly legal battle between the two entities that once were involved in a flirty courtship.