Twitter takeover saga enters ‘Twilight zone’: Elon Musk wants to end deal

Tesla CEO Elon Musk said that he wants to terminate the $44 billion Twitter deal, citing material breach of multiple provisions of the agreement, according to a letter written on his behalf to the company’s senior legal officer on Friday.

Skadden Arps attorney Mike Ringler alleged in the letter, which was released in a Securities and Exchange Commission filing, that “Twitter has not complied with its contractual obligations.”

Also read: Twitter will sue Musk over completion of $44 billion merger and ‘prevail’

Ringler alleged that Twitter failed to provide Musk with the key business information he requested, as required by the contract. Musk earlier stated that he intended to investigate Twitter’s allegations that roughly 5% of its monetizable daily active users (mDAUs) are spam accounts.

“Twitter has failed or refused to provide this information,” Ringler asserted. “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.”

Also read: Why is Elon Musk keen to walk away from Twitter deal?

Twitter responded saying that they will sue Musk over the completion of the deal and the company board’s chairperson Bret Taylor confirmed in a tweet that they were ‘confident’ that they will ‘prevail.’

“This is a disaster scenario for Twitter and its board,” Wedbush analyst Dan Ives wrote in a message to investors on Friday. He anticipated a lengthy legal battle by Twitter to either reinstate the partnership or obtain the $1 billion US breakup fee stated in the contract.

“From the beginning this was always a head scratcher to go after Twitter at a $44 billion price tag for Musk and never made much sense to the Street, now it ends (for now) in a Twilight Zone ending with Twitter’s Board back against the wall and many on the Street scratching their head around what is next,” Ives added.

Musk’s interest in acquiring Twitter seemed to begin in late March. That’s when Twitter claims he contacted members of its board, including co-founder Jack Dorsey, and informed them that he was snapping up shares in the firm and was interested in either joining the board, taking Twitter private, or launching a competitor.

Then, on April 4, he said in a regulatory filing that he had become the company’s top shareholder after purchasing a 9% interest worth approximately $3 billion US.

Also read: Knowing Elon Musk beyond the Twitter drama

Twitter initially offered Musk a seat on its board of directors. Six days later, however, Twitter CEO Parag Agrawal announced that Musk would not be joining the board. Following that, his offer to purchase the company came together fast.

Musk agreed to buy Twitter for $54.20 per share, including a “420” marijuana reference in his offer.

He sold nearly $8.5 billion in Tesla stock to help fund the acquisition, then increased his pledges to more than $7 billion from a wide group of investors, including Silicon Valley heavyweights like Oracle co-founder Larry Ellison.

Also read: Once upon a time: When Elon Musk met Twitter employees

Inside Twitter, Musk’s offer was met with bewilderment and low morale, particularly after Musk publicly chastised one of the company’s senior lawyers involved in content-moderation determinations.

As Twitter executives braced for the acquisition, the business implemented a hiring freeze, curtailed discretionary expenditure, and removed two key executives. The San Francisco-based firm has also been laying off employees, most recently a member of its recruitment team.