The deal between Elon Musk and social media giant Twitter is off — if Musk gets his way.
Inside a letter to Twitter’s legal department (opens in new tab) On Friday, Musk sought to terminate the merger agreement between him and his backers and Twitter, stating that “because Twitter materially violates several provisions of this Agreement, it appears to have made false and misleading representations on which Musk relied upon entering into the Agreement.” of Merger and is likely to experience a Material Adverse Effect on the Company (as that term is defined in the Merger Agreement).”
The letter was also filed with the SEC (opens in new tab).
The interest reversal comes three months after Musk tried to buy the popular social media platform for $44 billion. (opens in new tab).
At issue is the number of spam or bot accounts on Twitter. Musk believes the platform is full of them and Twitter has insisted its estimate is wrong. They eventually offered to let him examine their data, but Musk wanted an independent audit.
The letter adds that “Twitter failed or refused to provide this information. Sometimes Twitter ignored Musk’s requests, sometimes rejected them for reasons that seem unwarranted, and sometimes claimed to comply by providing Musk with incomplete information or information. unusable.”
Musk had big plans for Twitter, including making it more of a public square, promoting the editable tweets feature (which Twitter is already working on), and more open to unrestricted speech from all sides. There was some concern that he might invite former President Donald Trump back to Twitter (he was banned after the January 6 attacks), but this has never been confirmed.
While Musk had previously put the deal on hold as he tried to gain more knowledge about the number of bots on the platform, he’s been pretty quiet in recent weeks and notably hasn’t tweeted about trying to end the deal.
As to whether the business is actually dead or not, that remains to be seen. Musk could be on the hook for millions and Twitter or shareholders, who would have approved the deal next month, look set to sue Musk.
Twitter chairman Bret Taylor tweeted Friday night that the board will seek “legal action to enforce the merger agreement”.
The Twitter Board is committed to closing the transaction at the price and terms agreed with Mr. Musk and plans to take legal action to enforce the merger agreement. We are confident that we will prevail in the Delaware Court of Chancery.July 8, 2022
Still, it seems unlikely that Musk will enter into a new deal, at least not without a fight.
Analysis: And now
While Elon Musk says he’s “ending” the deal, it’s not that easy. Twitter’s board is bracing for a fight, even as some shareholders say I’d rather not have Musk as an owner (opens in new tab).
The board thinks it will prevail, but the reality is that this merger process has created tremendous uncertainty about the future of the platform now 16 years old. Musk seemed prepared to remove CEO Parag Agrawal and possibly clean the house. His plans for Twitter didn’t always seem to align with the reality of the platform and why its users love and use it.
While the stock price soared on the initial news of the merger, it returned to pre-merger announcement levels in mid-May when the deal began to falter.
Twitter likely needs a buyer to help support its expansion and development plans. It’s been a little rough this year, testing all sorts of new features, including launching a trial run of a new blogging platform called Notes. But like other social media platforms, it’s in a pitched battle with the giant that is TikTok. It’s unclear how Twitter can respond while staying true to what has made it a platform for media, brands, celebrities and millions of others.
Don’t expect Elon Musk to send you a follow-up letter saying, “Oh never mind, I’ll buy you Twitter.” He will respond to the Twitter board’s rebuttal soon and it won’t be the answer they want to hear.
Musk could pay billions in fines. So get ready for a long battle in which Twitter and those on its platform could end up being the losers.