Elon Musk notifies Twitter that he is ending his agreement

Billionaire Elon Musk wants to end his $44 billion deal to buy Twitter, says a letter sent by a lawyer on his behalf to the company’s general counsel on Friday.

But Twitter board chairman Bret Taylor said the company was still committed to closing the deal at the agreed price and planned to take legal action to enforce the deal.

“We are confident that we will prevail in the Delaware Court of Chancery,” Taylor wrote.

Twitter shares were down around 6% after hours on Friday.

In the letter, disclosed in a Securities and Exchange Commission filing, Skadden Arps attorney Mike Ringler said “Twitter failed to meet its contractual obligations.”

Ringler claimed Twitter failed to provide Musk with the relevant business information he requested because Ringler said the contract would require it. Musk has previously said he wants to assess Twitter’s claims that around 5% of its monetizable daily active users (mDAUs) are spam accounts.

“Twitter either failed or refused to provide this information,” Ringler said. “Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that seem unwarranted, and sometimes it has pretended to comply while giving Mr. Musk incomplete or unusable information.”

Ringler also charged in the letter that Twitter breached the merger agreement because it allegedly contains “materially misrepresentations.” This accusation is based on Musk’s preliminary review of spam accounts on the Twitter platform. Twitter said it was not possible to calculate spam counts from only public information and that a team of experts was conducting a review to reach the 5% figure.

“While this analysis is ongoing, all indications suggest that several of Twitter’s public disclosures regarding its mDAUs are either false or materially misleading,” Ringer alleged.

“Despite public speculation on this point, Mr. Musk did not waive his right to review Twitter data and information simply because he chose not to research such data and information before entering into the agreement. merger,” added Ringer. “In fact, he negotiated the access and information rights as part of the merger agreement precisely to be able to review data and information material to Twitter’s business before funding and completing the transaction.”

He also claimed Twitter breached its obligations under the agreement to obtain Musk’s consent before changing the normal course of business, pointing to recent layoffs at the company.

With Musk now officially looking to walk away from the deal, this saga is likely far from over.

Under the terms of the deal, Musk has agreed to pay $1 billion if he steps down. But as Twitter’s chairman of the board has indicated they will, the company may seek to compel Musk to honor its original deal by suing him for stepping down if they dispute that his reasoning should let him out. of the contract.

Twitter has reason to seek to keep Musk on his original terms. The stock has fallen significantly since the board announced it had accepted its offer to buy the company at $54.20 per share. On the day of this announcement, the stock ended the trading day at $51.70 per share. Shares of Twitter were at $36.81 as of Friday’s market close.

Musk is apparently also paying attention to the stock price, according to the letter, “and questioning whether the decline in the company’s business and financial outlook constitutes a material adverse effect for the company, giving Mr. Musk a distinct basis to terminate the merger agreement.

WATCH: A timeline of the Elon Musk-Twitter takeover saga

Lance B. Holton