Musk says he is terminating $44 billion Twitter deal; litigation likely

Tesla Inc.  CEO Elon Musk said on Friday he was terminating his $44 billion deal for Twitter Inc., citing a material breach of multiple provisions of the agreement.

The announcement likely brings to an end a will-he-won’t-he saga after the world’s richest person clinched a deal for Twitter in April but then put the buyout on hold until the social media company proved that spam bots accounted for less than 5 percent of its total users.

Twitter Chairman Bret Taylor said on the micro-blogging platform that the company’s board planned 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.

“Twitter is in material breach 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,” the filing said.

Musk also argued that Twitter has failed to operate its normal course of business. The San Francisco-based company instituted a hiring freeze, fired senior leaders and saw other major departures.

“The company has not received parent’s consent for changes in the conduct of its business, including for the specific changes listed above,” Musk said in the letter.

Last month, Twitter allowed Musk access to its “firehose,” a repository of raw data on hundreds of millions of daily tweets.

Musk’s deal with Twitter had included a provision that if it fell apart, the party breaking the agreement would pay a termination fee of $1 billion, under certain circumstances. Legal experts have debated whether the conflict over spam bots is enough to allow Musk to walk away from the deal.

The decision is likely to result in a long protracted legal tussle between the billionaire and the 16-year-old company.

Musk may not be able to walk away simply by paying the termination fee. The merger agreement includes a specific performance provision that allows Twitter to force Musk to consummate the deal, according to the original filing. That could mean that, should the deal end up in court, Twitter might secure an order obligating Musk to complete the merger rather than winning monetary compensation for any violations of it.

On June 6, Twitter doubled down on its promise to hold Musk accountable to the terms of his proposed takeover, a suggestion even then that the company thought he might be trying to blow up the deal. The company again Thursday said it would seek to enforce the merger if Musk chose to contest it.

Reuters and Bloomberg contributed to this report.