According to Reuters, Elon Musk, the founder and CEO of Tesla and the wealthiest man in the world, said on Friday that he was canceling his $44 billion plan to acquire Twitter because the social media business had broken many clauses in the merger agreement.
He said in his statement that “The Twitter Board is committed to closing the sale on the price and parameters agreed upon with Mr. Musk.”
In a filing, Musk’s attorneys said Twitter had neglected or failed to respond to multiple requests for information on bogus or spam accounts on the platform, which are essential to the commercial operations of the firm.
Twitter “is in material breach of many provisions of that Agreement,” the complaint argues, and “appears to have made false and misleading statements upon which Mr. Musk relied upon entering into the Merger Agreement.”
Musk’s decision to quit was also influenced by Twitter’s failure to fire senior executives following its need to “preserve substantially intact the material components of its current business organization.”
Musk’s decision will likely result in a protracted legal struggle between the billionaire and the 16-year-old San Francisco-based company.
When challenged mergers and acquisitions are taken before Delaware courts, agreements are typically renegotiated or the acquirer pays the target a settlement to withdraw rather than the deal being approved by a judge. Target organizations are driven to do this because they typically desire to move past the uncertainties surrounding their future.
Twitter is hoping that the legal procedure will start in the upcoming weeks and end in the following months, according to a source with knowledge of the circumstances.
Following Musk’s investment in Twitter in early April, the company’s shares increased, protecting it from a severe stock market sell-off that battered other social media companies.
However, the price quickly started to decline after he committed to buying Twitter on April 25 as investors worried Musk may back out of the agreement. Twitter was trading at its lowest level since March following its decline on Friday after the bell.
If Musk cannot complete the sale due to factors such as the acquisition finance falling through or authorities opposing the deal, the contract stipulates that Twitter will receive a $1 billion break-up payment from Musk. However, if Musk decides to end the agreement on his own, the break-up fee would not be charged.
On Friday, several workers appeared to be commenting on the divorce by openly sharing memes on Twitter, including images of a rollercoaster and a baby yelling into a phone. Many employees have expressed doubt about Musk’s promises to relax content control because they are concerned about what the merger would imply for their employment, salary, and ability to work remotely.
Alphabet, Meta Platforms, Snap, and Pinterest, competitors in internet advertising, have all had their stock prices fall by an average of 45 percent in 2022. The future of Twitter and its stock price are unknown as a result of Musk’s decision to back out of the acquisition. “Twitter and its Board are in for a nightmare,” said the analyst. (Writing by Anna Driver; Editing by Sriraj Kalluvila and Lisa Shumaker; Reporting by Greg Roumeliotis; Additional reporting by Chavi Mehta and Manas Mishra in Bengaluru; Sheila Dang in Dallas; Dawn Chmielewski in Los Angeles; Hyunjoo Jin and Katie Paul in San Francisco; Noel Randewich in Oakland, Calif.; David Shepardson in Washington; and Tom Hals in Wilmington.