In an on-again, off-again relationship that never reached the altar, the breakup is becoming sour.
Within hours of Elon Musk’s formal notification that he would not purchase Twitter for $44 billion after all, the firm stated it would not take the news lightly.
“We are committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plan to pursue legal action to enforce the merger agreement,” the company said in a one-paragraph statement.
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.
— Bret Taylor (@btaylor) July 8, 2022
The New York Times said that Twitter need the transaction to proceed.
“The stakes are high. The most valuable part of Twitter right now is its acquisition agreement with Mr. Musk. Its shares are down about 24 percent since April, and trade well below the price agreed with Mr. Musk. Twitter’s stock fell 4 percent in premarket trading on Friday,” the Times noted.
“To accept less than the price it originally negotiated with Mr. Musk could expose Twitter to shareholder lawsuits. So while litigation could be costly, losing the deal may be even worse.”
According to USA Today, Daniel Ives, senior stock research analyst at Wedbush Securities, reiterated this reasoning.
“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,” he added.
Musk stated that Twitter does not act in good faith, especially in regards to the problem of phony accounts. Twitter has estimated that roughly 5 percent of its users are fraudulent, spam, and bot accounts. Musk believes the true number is far more.
Musk stated in his letter to the Securities and Exchange Commission that the offer was dead because Twitter did not provide him with all the information necessary to evaluate the company’s financial health. The issue of bogus accounts was at the forefront of Musk’s complaints.
More on this story via The Western Journal:
“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,” the letter said.
“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.”
According to the letter, Twitter failed to provide information related to the company’s process for auditing spam and fake accounts as well as material regarding Twitter’s financial condition.
“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 said.