Elon Musk has reportedly abandoned his plan to acquire Twitter.
In April, Musk declared his intention to acquire the social networking site. The corporation first fled from Musk’s embrace, but now supports the arrangement.
Musk stated in mid-May that the transaction was on hold awaiting an investigation into the number of phony Twitter accounts. Twitter reports that around 5% of its accounts are bots. Musk believes the number to be far more. Commentators speculated at the time that the technique may have been part of a strategy to reduce the $44 billion acquisition price or a precursor to Musk’s withdrawal from the agreement.
In a letter to Twitter filed with the Securities and Exchange Commission on Friday, Musk stated that he was abandoning the deal.
The letter stated, “Mr. Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect.”
“Mr. Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions…, appears to have made false & misleading representations upon which Mr. Musk relied…, and is likely to suffer a Company Material Adverse Effect.”https://t.co/sQjkivdSm5 pic.twitter.com/tV58MNasrT
— Jerry Dunleavy (@JerryDunleavy) July 8, 2022
“While … the Merger Agreement requires Twitter to provide Mr. Musk and his advisors all data and information that Mr. Musk requests ‘for any reasonable business purpose related to the consummation of the transaction,’ Twitter has not complied with its contractual obligations,” the letter added.
“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.”
According to the letter, Twitter neglected to give details on the company’s auditing method for spam and false accounts, as well as financial information.
The letter refuted assertions that Musk decided to purchase Twitter without performing due diligence.
“Despite public speculation on this point, Mr. Musk did not waive his right to review Twitter’s data and information simply because he chose not to seek this data and information before entering into the Merger Agreement,” the letter said.
“In fact, he negotiated access and information rights within the Merger Agreement precisely so that he could review data and information that is important to Twitter’s business before financing and completing the transaction.”
The letter concludes that Musk, who might incur a $1 billion breakup fee if he is the party to terminate the agreement, is not at fault.
“Twitter is in breach of the Merger Agreement because the Merger Agreement appears to contain materially inaccurate representations,” the letter said, focusing on Twitter’s estimate of its fake accounts.
“Preliminary analysis by Mr. Musk’s advisors of the information provided by Twitter to date causes Mr. Musk to strongly believe that the proportion of false and spam accounts included in the reported [monetizable daily active users] count is wildly higher than 5%.”
The letter added that Musk is examining whether Twitter’s “declining business prospects and financial outlook constitute a Company Material Adverse Effect giving Mr. Musk a separate and distinct basis for terminating the Merger Agreement,” noting layoffs that have recently taken place.