Tesla CEO and billionaire Elon Musk announced his decision to end his deal to buy Twitter, according to a regulatory filing on Friday.
Musk made his decision known a letter dispatched by his lawyer on his behalf to Twitter’s chief legal officer, Vidaya Gadde, on late Friday. The announcement pushed Twitter’s shares down by 5% in afterhours trading.
In the letter, disclosed on the SEC website, Skadden Arps attorney Mike Ringler charged Twitter with failing to comply with its contractual obligations to Musk.
Ringler argued that Twitter failed to provide Musk with relevant business and financial information he requested, as stipulated in the acquisition agreement. Musk previously stated that he wanted to assess the social media platform’s claims that only around 5% of its monetizable daily active users (MDAUs) are spam or bot accounts.
—Ian Miles Cheong (@stillgray) July 8, 2022
“Twitter has failed or refused to provide this information,” Ringler claimed. “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.”
Ringler charged further that Twitter breached the agreement because it allegedly contains “materially inaccurate representations,” a claim based on Musk’s preliminary review of spam accounts on Twitter’s platform.
Musk asked his 100+ million followers of their opinions on the matter in the weeks leading up to letter, with many questioning Twitter’s claims about the veracity of its active users.
Twitter has stated that it is impossible to calculate spam accounts from solely public information, and that it had a team to review its accounts, that enabled it to reach the 5% figure.
“While this analysis remains ongoing, all indications suggest that several of Twitter’s public disclosures regarding its mDAUs are either false or materially misleading,” Ringer claimed,
Musk’s lawyer added that Twitter breached its obligations under the agreement to get Musk’s consent before changing its ordinary course of business. He cited the company’s recent hiring changes and layoffs as evidence of this behavior.
In response to the filing, Twitter said it will sue Elon Musk to complete the $44 billion acquisition. The company says it is “confident” it will win.