On Friday, Tesla boss Elon Musk announced that he will abandon his tumultuous $44 billion offer to buy Twitter after the company failed to provide enough information about the number of fake accounts. Twitter immediately fired back, saying it would sue the Tesla CEO to uphold the deal.
The likely unraveling of the acquisition was just the latest twist in a saga between the world’s richest man and one of the most influential social media platforms, and it may portend a titanic legal battle ahead.
Twitter could have pushed for a $1 billion breakup fee that Musk agreed to pay under these circumstances. Instead, it looks ready to fight to complete the purchase, which the company’s board has approved and CEO Parag Agrawal has insisted he wants to consummate.
In a letter to Twitter’s board, Musk lawyer Mike Ringler complained that his client had for nearly two months sought data to judge the prevalence of “fake or spam” accounts on the social media platform.
Fake accounts
In May, Musk said the deal was "temporarily on hold" as he was awaiting data on the number of fake and spam accounts on Twitter.
The billionaire businessman had asked for evidence to back the company's assertion that spam and bot accounts make up less than 5% of its total users.
In a letter filed with the US Securities and Exchange Commission, Mr Musk's lawyer said Twitter had 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," the letter reads.
Legal battle awaits
Musk later suggested he could seek to pay a lower price for Twitter because of the fake accounts issue. Speaking virtually at a conference in Miami, he said reducing his agreed $54.20 a share offer would not be “out of the question”. However, the terms of Musk’s takeover agreement with Twitter gave him only limited room for manoeuvre, according to legal experts.
The dispute between Musk and Twitter could be fast tracked to court, but before it gets there Musk and Agrawal will likely meet up, however awkwardly, on Saturday at Allen & Co’s Sun Valley Conference in Idaho that both are attending and where Musk is scheduled to speak.
Twitter shares tank
On Friday, shares of Twitter fell 5% to $36.81, well below the $54.20 that Musk agreed to pay. Shares of Tesla, meanwhile, climbed 2.5% to $752.29. After the market closed and Musk’s letter was published, Twitter’s stock continued to decline while Tesla climbed higher.
“This is a disaster scenario for Twitter and its board,” Wedbush analyst Dan Ives wrote in a note to investors. He predicted a long court fight by Twitter to either restore the deal or get the $1 billion breakup fee.
Analysts said the break-up, with or without a court battle, would probably be damaging to Twitter’s valuation and its ability to seek a new buyer.
(with inputs from AP)
