The deal between Elon Musk and social media giant Twitter is off – if Musk gets his way.
In a letter to Twitter’s legal department (opens in new tab) late Friday, Musk sought to terminate the merger agreement between him and his financial backers and Twitter stating, “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 (as that term is defined in the Merger Agreement).”
The letter was also filed with the SEC (opens in new tab).
The reversal of interest comes three months after Musk sought to buy the popular social media platform for $44 billion (opens in new tab).
At issue is the number of spam or bot accounts on Twitter. Musk believes the platform is full of them and Twitter has insisted that his estimation is wrong. They eventually offered to let him look at their data, but Musk wanted an independent audit.
The letter adds that “Twitter has failed or refused to provide this information. 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.”
Musk had big plans for Twitter, including making it more of a public square, pushing through the editable tweets feature (which Twitter is already working on), and more open to unfettered speech from all sides. There was some concern he might invite Former President Donald Trump back onto Twitter (he was banned after the January 6th attacks), but that was never confirmed.
While Musk had previously put the deal on hold as he tried to gain further knowledge about the number of bots on the platform, he’d grown rather quiet about it in recent weeks and, notably, did not tweet about seeking to end the deal.
As for whether or not the deal is truly dead, that remains to be seen. Musk could be on the hook for millions and Twitter or shareholders, who would have approved the deal as soon as next month, seem prepared to sue Musk.
Twitter’s Chairman Bret Taylor tweeted on Friday evening that the board will pursue “legal action to enforce the merger agreement.”
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.July 8, 2022
Still, it seems unlikely Musk will entertain a new deal, at least not without a fight.
Analysis: Now what
While Elon Musk says he’s “terminating” the deal, it’s not that easy. Twitter’s board is gearing up for a fight even as some shareholders say they’d rather not have Musk as an owner at all (opens in new tab).
The board thinks it’ll prevail, but the reality is, that this merger process has created tremendous uncertainty about the future of the now 16-year-old platform. Musk appeared prepared to remove CEO Parag Agrawal and possibly clean house. His plans for Twitter did not always seem to align with the reality of the platform and why its users love and use it.
While the stock price rose on the initial merger news, it dropped back down to pre-merger announcement levels in mid-May as the deal started to falter.
Twitter probably needs a buyer to come in and help support its plans for expansion and development. It’s been on a bit of a tear this year, testing all sorts of new features including launching a test of a new blog platform called Notes. But like other social media platforms, it’s in a pitched battle with the juggernaut that is TikTok. It’s unclear how Twitter can answer while remaining true to what made it a go-to platform for media, brands, celebrities, and millions of others.
Do not expect Elon Musk to send a follow-up letter saying, “Oh, never mind, I’ll buy you, Twitter.” He will answer the Twitter board’s rebuttal soon enough and it will not be the answer they want to hear.
Musk can afford to pay out billions in penalties. So, prepare for a long battle in which Twitter and those on its platform may end up the losers.