Twitter was accused of misleading Mr. Musk about the nature of the business and the acquisition by Mr. Musk’s attorneys.
In a filing with the US Securities and Exchange Commission, attorneys claimed that Twitter “appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement” (SEC).
In the agreement between Mr. Musk and Twitter, there was a $1 billion breakup fee that the businessman would have to pay if the deal fell through. However, it seemed from filings from Mr. Musk’s legal team that he believed the agreement to be invalid.
Twitter, however, made it clear that it still sees the agreement as being in effect and that Mr. Musk must adhere to its terms.
Bret Taylor, the chairman of Twitter, 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.” We’re sure we’ll win in the Delaware Court of Chancery.
Mr. Musk has claimed time and time again that Twitter executives have concealed the full extent of automated and bot accounts on the site. Twitter claims that they make up less than 5% of its active users, a statistic that Mr. Musk said he would not accept until he was able to verify it for himself.
The filing went on to say that Mr. Musk had been looking for information and data for almost two months in order to “make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform.”
“Twitter failed to provide this information or refused to do so. Twitter has occasionally ignored Mr. Musk’s requests, rejected them for apparent unjustified reasons, and claimed to comply while providing Mr. Musk with inaccurate or incomplete information.
Lawyers claimed that Mr. Musk had requested more information on how Twitter determines its daily active users as well as specifics on how it finds spam and fake accounts and suspends them.
The letter was almost entirely concerned with the issues involving fake and spam accounts. However, it also noted that Twitter’s operations had changed significantly since Mr. Musk made the offer to purchase the company, citing the recent firing of a number of senior staff members as evidence.
Throughout the takeover, Mr. Musk has commented on its status using his personal Twitter account. However, there had been a noticeable lull in updates on the transaction from his account before the announcement. On Friday, Mr. Musk had been sharing memes from Anchorman and SpongeBob SquarePants as well as his enthusiasm for his other businesses.
When Mr. Musk started raising his stake in the company in January, the planned takeover of Twitter got under way. It was revealed in April that he had made enough purchases to take the position of largest shareholder in the business.
Soon after that, he consented to join the Twitter board before abruptly resigning. Instead, he made a purchase offer for the entire business, which Twitter accepted by the end of April.
However, in May, Mr. Musk stated that the agreement was “on hold” and cited a story about Twitter’s disclosures regarding fake accounts. He posted on Twitter that the “Twitter deal is temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.”
Since then, the agreement has seemed to be stuck as Mr. Musk has threatened to back out and demanded more details on those fictitious accounts. There have been rumors about the deal possibly collapsing lately.
Following that, Mr. Musk’s attorneys formally canceled the merger agreement between the billionaire and the social network by filing a letter with the SEC on Friday addressed to Vijaya Gadde, Twitter’s chief legal officer.
The share prices of Twitter and Mr. Musk’s own Tesla have fallen as the deal has been negotiated. Given that the terms would now require paying significantly more than the stock market value of Twitter, there was speculation that Mr. Musk might be trying to find a convenient way to back out of the agreement.