Elon Musk decided to end his $44 billion bid to take over Twitter, according to a letter sent by his lawyers to the Securities and Exchange Commission (SEC).
Bret Taylor, Twitter’s board of trustees chairman, said they are still confident that the transaction will happen and will pursue legal action if Musk backs out.
“We are confident we will prevail in the Delaware Court of Chancery,” Taylor tweeted.
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. We are confident we will prevail in the Delaware Court of Chancery.
— Bret Taylor (@btaylor) July 8, 2022
In the letter to the SEC, attorney Mike Ringler claimed that Twitter has not held up its end of the bargain.
Ringler said Twitter has not provided Musk with the relevant business information required by the contract. Musk previously said he wants to look into the claim that only 5% of Twitter’s daily users are spam accounts.
“Twitter has failed or refused to provide this information,” Ringler claimed. “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 Dallas Express reported that Musk thought the number of spam users might be closer to 20%.
Twitter said it is not possible to calculate spam accounts from solely public information and that a team of experts conducts a review to reach the 5% figure.
“While this analysis remains ongoing, all indications suggest that several of Twitter’s public disclosures regarding its mDAUs are either false or materially misleading,” Ringer alleged in the letter to the SEC.
The letter states Twitter also failed to meet its obligation to obtain Musk’s approval before changing daily procedures at the company. The letter points to recent layoffs at Twitter as evidence.
Musk may want to leave the deal on the table, but the outcome is still to be determined.
Musk owes Twitter a $1 billion “breakup” penalty if he backs out, CNBC reported, but Twitter’s board said the company could hold Musk to his original deal by suing him for walking away if Musk does not show just cause.
Twitter may have grounds to seek to hold Musk to his original terms, according to CNBC.
When the social media giant accepted Musk’s bid, shares were selling at $54.20 per share, according to the CNBC report. By the close of business that day, the stock price had fallen to $51.70.
As of close of business on July 9, shares were down to $36.81.
Musk is also paying attention to the stock price. According to the letter to the SEC, Musk may seek additional grounds for termination based on the declining economic performance of the social media platform.