Elon Musk has tried to cancel his $44 billion bid to buy Twitter, according to a letter filed by his lawyers Friday.
He’s claiming the company is in “material breach” for making “false and misleading” statements throughout the process. Musk’s lawyers wrote that Twitter has failed to produce critical data about spam and bot accounts.
“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,’” Musk’s lawyers wrote. “Twitter has failed or refused to provide this information.”
It's not clear if he will be able to pull out solely due to the claims over spam bots. The deal included a provision that any breakdown of the agreement would require the breaking party to pay a termination fee of $1 billion. Twitter could also sue Musk and attempt to enforce the agreement, though that process would undoubtedly be expensive and could take months or longer.
In response to Musk's letter, Twitter board chair Bret Taylor wrote on Twitter that the company will indeed pursue legal action against Musk to make sure the agreement goes through at the price and terms previously agreed upon.
“We are confident we will prevail,” Taylor wrote.
Twitter's stock fell 5 percent on Friday and another 6 percent after hours, to $34.60 per share. Musk agreed to buy the company at a price more than 1.5 times higher: $54.20 per share.
That figure included the numbers “420,” a reference to marijuana that Musk has repeatedly included in his online trolling.
But the imminent litigation is no laughing matter—and for months the dealmaking process has been a massive distraction and headache both for Twitter's leadership and its employees.
“The rollercoaster of this has affected me physically. I developed goddamned ULCERS over this,” one current employee told The Daily Beast on Thursday, as it became increasingly clear that Musk would back out.
“I honestly don’t know how to feel, and most of my colleagues don't seem to either. But no one’s mad,” another Twitter employee told The Daily Beast shortly after news of Musk’s move broke. “It’s more just ‘okayyyy so NOW what.’”
One employee who spoke to NBC News on the condition of anonymity said: “I guess it feels like we won. But it feels like the end of the movie, where the characters are bloodied and bedraggled with a Michael Bay explosion behind them. We could see this was coming, but in the meantime he’s f---ing destroyed the company.”
The ongoing turbulence commenced at the start of the year, when Musk quietly began amassing Twitter shares.
He failed to promptly notify investors after he surpassed a 5 percent ownership stake in the business in March, according to a subsequent lawsuit. But in April he finally did go public, revealing a 9.2 percent stake, before continuing to buy more.
At first, Twitter's leadership tried to play nice with the billionaire, offering him a spot on its board. Musk accepted. Then, at the last moment, he reneged.
The company subsequently adopted a so-called “poison pill,” the corporate strategy used to prevent an undesirable stockholder from gaining control of a business. But Musk shocked the world again by declaring that he wanted to buy the platform outright.
To the surprise of some, Musk was apparently serious. He lined up the requisite financing and ultimately signed a binding agreement, seemingly without conducting due diligence.
It was just weeks later that the tech industry grew increasingly wobbly, and Twitter's stock plummeted in turn. Musk appeared to get cold feet, lashing out about the prevalence of spam and bots on the site, and deciding—retroactively—that the company needed to prove it hadn't understated the number of fake accounts on its platform.
That excuse now serves as the basis of Musk's attempt to back out of the deal. Whether a judge buys it is another story entirely.