Billionaire Elon Musk called off his deal to buy social media company Twitter, according to a filing on Friday with the Securities and Exchange Commission.
Skadden Arps attorney Mike Ringler said in a letter to Twitter's chief legal officer that “Twitter has not complied with its contractual obligations."
For nearly two months, the company has failed to provide Musk with information about fake or spam accounts, the letter said.
The billionaire Tesla and SpaceX CEO is almost as known for his polarizing online persona as his entrepreneurial endeavors. He is popular on Twitter, where he chimes in on politics, talks business openly, and embraces the internet’s meme culture. Some of his tweets have landed him in legal trouble.
Who is Elon Musk?:What to know about the Tesla CEO who wanted to buy Twitter
Musk deal termination a Twitter 'disaster'
“Never in a million years would I have imagined this,” said Daniel Ives, senior equity research analyst at Wedbush Securities.
Ives predicts "an uphill battle for Twitter" and "a lot of legal twists and turns."
"This is a disaster scenario for Twitter and its Board as now the company will battle Musk in an elongated court battle to recoup the deal and/or the breakup fee of $1 billion at a minimum,"
Ives said Musk should likely share in some of the blame.
“It’s going to be a black eye for Musk as well," Ives said. "He doesn’t come out smelling like roses.”
Jennifer Grygiel, a professor at Syracuse University who studies social media extensively, believed from the start that a powerful man like Musk may have had cruel intentions when pursuing Twitter.
“I think it’s fair to say that he understands it’s a powerful communications platform and he used it to wage some political battle,” Grygiel said about Musk. “He felt that his speech was threatened and he needed to maintain his power and privilege."
– Terry Collins
Who is Elon Musk?:What to know about the Tesla CEO who wanted to buy Twitter
When did Musk agree to buy Twitter?
Musk’s $44 billion deal was confirmed in late April after Musk spent nearly three months buying up Twitter shares to increase his stake in the company. At the time, the billionaire said he wanted to “make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans."
– Bailey Schulz
Why isn't Elon Musk buying Twitter?
In a word, bots. While Twitter has said bots make up just 5% of its monetizable daily active users, the letter says that Twitter appears to be “dramatically understating” the proportion of spam and false accounts. Musk has previously contended that the count is 20% or higher.
– Bailey Schulz
TWITTER BOTS:What are they and how could they mess up Elon Musk's $44 billion Twitter deal?
How is the Twitter Board responding?
The board plans to sue Musk, according to Bret Taylor, chair of Twitter's board.
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," the tweet read.
In its latest quarterly report, Twitter warned that its financial condition "may suffer" if the merger does not close. Tumbling stock prices, low investor confidence, stockholder lawsuits, and business disruptions were just a few of the possibilities the company laid out.
– Terry Collins
– Bailey Schulz
Can Musk walk away?
According to a document filed with the SEC on April 25, Musk would be on the hook for $1 billion if he terminates the deal.
– Bailey Schulz
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