Musk bails on Twitter takeover; social media app to take billionaire to court

The world’s richest man Elon Musk is pulling out of the US$43 billion deal to buy social media platform Twitter.

Musk made a filing with the Securities and Exchange Commission on Friday 08/07, informing the regulator that he is terminating the deal, arguing that Twitter had provided “false and misleading” statements that were in “material breach” of the deal.

The statement reads: “For nearly two months, Mr. Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform. Twitter has failed or refused to provide this information.”

Twitter, which had initially resisted the deal, is now saying that it will “pursue legal action to enforce the merger agreement”.

While Twitter has repeatedly sought to assure investors and the public that spam accounts are under control, Musk’s camp has argued that this has not been sufficient to provide a confident estimate of active real users. The billionaire’s lawyers have also pointed to the firing of two top executives, redundancies in talent acquisition and a hiring freeze as breaches of the agreement.

Critics had argued that Musk’s attempt to buy Twitter was merely a publicity stunt, and that he never actually intended on going through with the deal based on a history littered with broken big promises across both Tesla and SpaceX.

Regardless, the agreement between Twitter and Musk has a US$1 billion break clause which will be paid by the party at fault, with this almost certainly set to be determined in court. 

Following Musk’s statement, it was reported that Twitter has hired Wachtell, Lipton, Rosen & Katz and its  founding partner, Martin Lipton, to represent it in the Delaware Court of Chancery. Lipton is noteworthy for inventing the ‘poison pill’ defence that Twitter initially used in an attempt to avoid a hostile takeover from Musk in the first place.

Twitter chairman Bret Taylor subsequently 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 are confident we will prevail in the Delaware Court of Chancery.”