After receiving official notice from Elon Musk that he would not be paying $44 billion for Twitter, the firm declared that it would not take Musk’s decision lightly.
The company stated in a one-paragraph statement, “We are committed to finalizing the acquisition on the price and terms agreed upon with Mr. Musk and plan to pursue legal action to enforce the merger agreement.
According to the New York Times, Twitter needs the agreement to close.
“The odds are against us. The acquisition agreement between Twitter and Mr. Musk is currently its most valued component. Since April, its shares have fallen by around 24%, and they currently trade for far less than the price set with Mr. Musk. The Times reported that Twitter’s shares dropped 4% in Friday’s premarket trade.
BREAKING: Elon Musk has officially terminated his $44 billion deal to buy Twitter. https://t.co/y5TGzlPed6
— IGN (@IGN) July 8, 2022
Accepting less than the sum Twitter initially agreed upon with Mr. Musk might subject Twitter to shareholder lawsuits. Therefore, while litigation would be expensive, losing the deal might be worse.
According to USA Today, senior stock research analyst at Wedbush Securities Daniel Ives reiterated this reasoning.
“This is a terrible scenario for Twitter and its Board since the firm will now fight Musk in a drawn-out legal battle to recover the deal and/or the breakup fee of at least $1 billion,” he said.
Musk claimed that Twitter does not act honestly, particularly when it came to the problem of phony accounts. Twitter has stated that it believes that 5% of its users are made up of fraudulent, spam, and bot accounts. Musk thinks the actual figure is significantly higher.
Musk said that Twitter did not provide him with all the information he required to assess the company’s financial stability in his letter to the Securities and Exchange Commission declaring the acquisition to be dead in the water. The main complaint Musk listed was the problem with phony accounts.
Elon Musk tells Twitter he's terminating deal to buy social media gianthttps://t.co/5RpjxK5eRJ
— FOX Business (@FoxBusiness) July 9, 2022
According to the letter, “Mr. Musk is terminating the Merger Agreement because Twitter is materially in violation 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.”
Twitter has not fulfilled with its contractual responsibilities, even though the Merger Agreement compels it to give Mr. Musk and his advisors any data or information they want “for any reasonable business purpose relating to the closing of the deal,” according to the statement.
The letter claims that Twitter neglected to deliver documents pertaining to the company’s procedure for assessing spam and false accounts as well as information on Twitter’s financial situation.
“Mr. Musk firmly believes that the amount of fraudulent and spam accounts included in the published [monetizable daily active users] count is considerably more than 5%,” the letter stated. “Preliminary examination by Mr. Musk’s advisors of the material provided by Twitter to date.”