Buyers sometimes develop cold feet right after getting what they want. But Musk says his decision to back out of the Twitter deal is due to too many unanswered questions.
Billionaire Elon Musk is backing out of the $44 billion deal that saw his Twitter bid approved a few months ago. And in respect to this decision, the Tesla CEO has now sent a letter of notice to the firm’s Chief Legal Officer. In the letter, which was revealed in a Securities and Exchange Commission (SEC) filing, Skadden Arps lawyer Mike Ringler believes that Twitter did not comply with its contractual obligations.
The Issue
It is almost common for buyers to sometimes develop cold feet right after getting what they want, and that exactly happened to Musk. Shortly after the Twitter deal pulled through, Musk had some questions, particularly regarding what percentage of the platform’s active accounts are spam or fake. He had tweeted:
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.”
But those calculations that Elon Musk requested never came. As Ringler confirms, albeit in parts:
“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.”
More than the claims that Twitter did not provide adequate information, Ringler also believes that Twitter made “materially inaccurate representations.” And that these are enough grounds to breach whatever agreement the two parties have arranged.
Twitter May Charge Elon Musk to Court
Meanwhile, Twitter’s board of directors is not the least bit impressed with Musk’s decision. And according to the board chair, Bret Taylor, the firm will still look to finalize the deal at prices initially agreed by both parties. However, Twitter may take legal action against Musk if necessary, to enforce the agreement.
“We are confident we will prevail in the Delaware Court of Chancery,” Taylor wrote.
Meanwhile, it should be noted that Musk had agreed to pay $1 billion if ever he backs out. However, given the current claims and counterclaims, this might be a more prolonged legal tussle than expected.
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