Tesla CEO Elon Musk has officially notified Twitter that he is ending its $44 billion bid to acquire the social media platform. Musk’s attorney explained, “Twitter is in material breach of multiple provisions of the agreement.”
Musk terminated his contract with Twitter, citing “material breach of multiple covenants”
Lawyers for Tesla and SpaceX CEO Elon Musk sent a letter to Twitter on Friday regarding the proposed acquisition of the social media platform.19} The letter, filed with the U.S. Securities and Exchange Commission (SEC), states.
Musk is terminating the merger agreement because Twitter is in material breach of multiple provisions of that agreement.
The letter alleges that Twitter made “false and misleading representations” and that Mr. Musk believed them when he signed the merger agreement between Twitter and his company, X Holdings I Inc. and X Holdings II Inc. and claims that Mr. Mask relied on it when he signed the merger agreement between X Holdings I Inc. and X Holdings II Inc.
The attorney explained that Twitter failed to comply with its contractual obligation to provide Musk with the necessary data.
For nearly two months, Musk has been asking for the data and information he needs to “conduct his own assessment of the prevalence of fake or spam accounts on the Twitter platform,” the attorney explained, elaborating.
Twitter sometimes ignored Mr. Mask’s requests, sometimes refused for reasons that seemed unreasonable, and sometimes insisted on complying with his requests while giving him incomplete or unusable information.
The letter acknowledges that Twitter provided some information. However, it noted that “that information came with strings attached, usage restrictions, and other artificial formatting features that made some of the information minimally useful to Mr. Mask and his advisors.”
In early June, Mr. Mask’s attorney notified Twitter of the material breach and warned that Mr. Mask might terminate the deal. The attorney noted that “the cure period granted to Twitter under the merger agreement has now expired.”
Additionally, Mr. Mask’s attorney argued that Twitter made “grossly inaccurate representations,” particularly with respect to claims that “less than 5%” of the social media company’s mDAUs were fake or spam accounts. Twitter defines “monetizable daily active usage or users (mDAU) as Twitter users who log in and access Twitter on any given day through Twitter.com or a Twitter application that can display ads.
Based on Mask’s own preliminary analysis:
All indications suggest that some public information about Twitter mDAU is false or grossly misleading … The percentage of fake and spam accounts in the reported mDAU counts is wildly higher than 5%.
Moreover, “the disclosure that Twitter will no longer count fake or spam users in mDAUs if it determines those users are fake appears to be false,” the attorney stated.
The letter further notes that Twitter has deviated from its obligation to “keep material components of its current business organization substantially intact.” Since the Musk deal was signed, the social media company has laid off key high-level employees and announced on July 7 that it would lay off one-third of its talent acquisition team. Additionally, three executives have resigned.
Noting that Twitter had not agreed to these changes, Musk’s lawyers argued that the company’s actions further constituted a material breach of the merger agreement with the Tesla CEO.
The letter concluded.
For these reasons, Mr. Musk hereby exercises his right to terminate the X Holdings I merger agreement and to abandon the transactions contemplated thereby.
Twitter director Brett Taylor tweeted the following on Friday in response to Mr. Mask’s termination of the merger agreement:
The Twitter board is committed to closing the deal at the price and terms agreed to with Mr. Mask and plans to take legal action to enforce the merger agreement.
He added, “We are confident that we will prevail in the Delaware Chancery Court.”
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