Billionaire Elon Musk has decided to back out of the deal to buy Twitter, a mere 3 months after his acquisition proposal was accepted by the company’s Board of Directors in April 2022.
According to the letter he filed to the SEC on Friday, July 08, the reason for this startling move is Twitter’s alleged misrepresentation of user data, particularly the underreporting of the number of automated/fake accounts known as spam bots on its platform. Twitter has denied Musk’s claims of over 20% such accounts, saying bots are less than 5% of the total users, with executives repeating as recently as Thursday in a press briefing that their estimates are accurate.
The news sent Twitter stock tumbling 7% in New York, down from $51.70 a share (on the day of the acquisition) to $36.81 on Friday, shaving some $14 billion off its total value.Twitter is not sitting back on this one and has vowed to enforce the merger agreement. Bret Taylor, Chairman of the Board, tweeted, “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.”
Under certain conditions, Musk’s agreement with Twitter included a provision requiring the party breaching the agreement to pay a $1 billion termination fee. However, the critical question is whether he can walk away from the deal with just that. According to Bloomberg, if the deal is challenged in court, Twitter may obtain an order requiring Musk to complete the merger rather than monetary compensation for any violations.
