Elon Musk, the chief executive officer of Tesla, has notified Twitter that he is terminating the proposed $44 billion deal to buy Twitter because the microblogging platform had failed to provide adequate information about fake and spam accounts.
Musk's announcement sets the stage for what is likely to be a protracted legal battle between the charismatic billionaire entrepreneur and social media company.
Twitter's chairman, Bret Taylor, vowed to pursue legal action to enforce the merger agreement.
"The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk...," he wrote.
In a filing, Musk's lawyers said Twitter had failed or refused to respond to multiple requests for information on fake or spam accounts on the platform, which is fundamental to the company's business performance.
"While Twitter has provided some information, that information has come with strings attached, use limitations or other artificial formatting features, which has rendered some of the information minimally useful to Mr. Musk and his advisors." the filing noted.
While acknowledging that Twitter provided access to the eight developer "APIs" after initial resistance, the filing claimed that APIs contained a rate limit lower than what Twitter provides to its largest enterprise customers.
"Twitter only offered to provide Mr. Musk with the same level of access as some of its customers after we explained that throttling the rate limit prevented Mr. Musk and his advisors from performing the analysis that he wished to conduct in any reasonable period of time." the filing added.
"Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Musk relied when entering into the Merger Agreement," the filing further stated.
The announcement on Friday is the latest twist in a dramatic saga that began in April this year when Musk announced it he had clinched a $44 billion deal for Twitter in April.
Musk first offered to buy Twitter, but the board of social media company adopted a "poison pill" plan in an attempt to block the deal. Twitter subsequently reversed course and relented to a $44 billion buyout, which Musk termed his "best and final" offer.
Musk even stitched together a funding arrangement for the Twitter acquisition. The buyout was proposed to be funded by $21 billion in cash, $12.5 billion of margin loans secured against Musk's 16% stake in Tesla, together with $13 billion in loans from a consortium of banks. Subsequently, the contours of the funding arrangement were recalibrated, with Musk reducing the size of the loan against his Tesla shares from $13 billion to $6.25 billion. The repackaging was seen as an attempt by Musk to address the pressure on the Tesla share price over concerns that Musk might sell Tesla stock as part of the financing deal.
Even as financing for the deal was being secured, Musk suddenly indicated that he was keeping it in abeyance until the social media company proved that fake and spam bots account for less than 5% of its user base.
The terms of the deal require Musk to pay a $1 billion breakup fee if he does not complete the transaction.
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