Tesla CEO Elon Musk recently revealed that he plans to terminate his $44 billion deal to acquire Twitter due to "false and misleading representations," causing the social media company to threaten the world's richest man with a lawsuit.
Musk reportedly sent a letter to the social media company's board saying that he was planning to terminate the deal. However, Twitter said that it plans to file legal action against the world's richest man and noted it was "confident" it would prevail.
Musk's $44 Billion Twitter Acquisition Deal
The chair of the social media company's board, Bret Taylor, posted that the 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."
If Musk continues to pull out of the agreement, Twitter could have accepted the $1 billion termination fee that the Tesla CEO agreed to. The issue between the world's richest man and the social media company began in March when the former announced he would pull the funds necessary to buy the company that he thought was failing to live up to its potential, as per DW News.
Furthermore, Musk revealed that he had already been talking to executives at Twitter, including co-founder Jack Dorsey, to let them know that he was buying up shares in an attempt to gain a majority. The Tesla CEO's lawyers said in a court filing that Twitter had breached the acquisition agreement by failing to provide enough information about fake accounts on its platform.
According to the document, this was a crucial piece of data for measuring the social media company's business performance following the news. Twitter shares fell 6% in extended trading. Musk said his latest move was made due to a "material breach" of the deal.
According to Rolling Stone, ever since Musk announced his plan to buy Twitter for $44 billion back in April, he has accused the social media company of inflating its user base with spam accounts. The Tesla CEO's legal team said that for nearly two months Musk had sought the data and information necessary to make an independent assessment of the prevalence of fake or spam accounts on Twitter's platform.
Backing Out of the Agreement
The social media company has publicly said that an estimated 5% of daily users who see ads are bots or spam accounts, though it admits it could be higher in reality. Musk believes that fake Twitter accounts comprise as much as 20% of the platform. However, even if the numbers don't match up, it may not be enough for the world's richest man to renege on the deal without penalty.
A business law professor at Tulane University, Ann Lipton, said that merger agreements are drafted to avoid exactly what Musk is doing, which is trying to find a little reason to walk away. Agreements specifically say that a buyer cannot fall back on their commitment unless the reason was incredibly false.
The situation comes as Musk's attempts to buy the social media company have resulted in various internal changes for Twitter and would notably be different compared to before the Tesla CEO's acquisition plans, The Verge reported.
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