Twitter says it will go to court after the world’s wealthiest person announced he is terminating a planned $44 billion acquisition.
In a letter sent on Friday, July 8 from a law firm representing Tesla cofounder/CEO Elon Musk to Twitter chief legal officer Vijaya Gadde, attorney Mike Ringler notified Twitter that Musk is terminating a definitive agreement he entered in April 2022 to purchase Twitter.
Under terms of that deal, Musk agreed that an entity wholly owned by him would acquire Twitter for $54.20 per share in cash in a transaction valued at approximately $44 billion. Upon completion of the transaction, Twitter would become a privately held company.
Under the terms of the agreement, Twitter stockholders would receive $54.20 in cash for each share of Twitter common stock that they own upon closing of the proposed transaction. The purchase price represents a 38% premium to Twitter's closing stock price on April 1, 2022, which was the last trading day before Musk disclosed his approximately 9% stake in Twitter.
Generally considered the wealthiest person on the planet, Musk has an estimated net worth of $264.6 billion. In addition to electric vehicle manufacturer/retailer Tesla, Musk’s other companies include private space travel company SpaceX and tunnel construction firm The Boring Company.
However, in the July 8 letter, Musk’s attorney said he is exercising a right to “terminate the merger agreement and abandon the transaction contemplated thereby.” The agreement does contain a clause allowing Musk to walk away from the deal for a $1 billion fee. However, Twitter has the right to dispute Musk’s reasoning in court and hold him to the $44 billion acquisition. According to a July 8 tweet from Brett Taylor, Twitter chairman and Salesforce co-CEO, the social media platform plans to do just that.
“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,” Taylor said in the tweet. “We are confident we will prevail in the Delaware Court of Chancery.”
Why Musk is terminating the deal
In the letter, Ringler says Musk is reneging on the agreement 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.
Specific allegations against Twitter, which Twitter publicly denies, include:
- Not providing Musk the data necessary to independently evaluate the prevalence of fake and spam accounts on Twitter.
- Not providing Musk Twitter’s methodology and performance data relating to how it identifies and suspends spam and false accounts.
- Not providing financial, budgetary and valuation data Musk says is necessary to secure debt financing for the deal.
Ringler also said in the letter that information Twitter did provide had “strings attached” which rendered some of it “minimally useful.” In addition, Twitter’s stock closed at $36.81 per share at the end of the day on Friday, July 8, well below the $54.20 per share purchase price in the $44 billion agreement.
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