By BARBARA ORTUTAY, TOM KRISHER and MATT O’BRIEN
Elon Musk has announced he will back out of his troubled $44 billion bid to buy Twitter, leaving the deal on the brink of collapse. Tesla’s CEO sent a letter to Twitter’s board on Friday saying he was ending the acquisition.
But Twitter is not accepting Musk’s statement. Twitter Chairman Bret Taylor tweeted in response that the board is “committed to closing the transaction at the price and terms agreed upon with Musk and plans to pursue legal action to enforce the merger agreement.” We are confident that we will prevail in the Delaware Cancer Court.”
Twitter could have pushed for a $1 billion breakup fee that Musk agreed to pay under those circumstances. Instead, it appears willing to fight to complete the deal, which the company’s board has approved and CEO Parag Agrawal has insisted he wants to achieve.
The potential termination of the deal is just the latest twist in a saga between the world’s richest man and one of the most influential social media platforms. Much of the drama played out on Twitter, with Musk — who has more than 100 million followers — complaining that the company was not living up to its potential as a platform for free speech.
On Friday, Twitter shares fell 5% to $36.81, well below the $54.20 Musk had offered to pay. Meanwhile, Tesla shares rose 2.5% to $752.29.
Musk’s lawyer, Mike Ringler, wrote in the letter to Twitter on Friday that for nearly two months, Musk has been seeking data to judge the prevalence of “fake or spam” accounts on the social media platform.
“Twitter failed or refused to provide this information. “Twitter has sometimes ignored Musk’s requests, sometimes rejected them for reasons that appear unjustified, and sometimes pretended to be in compliance by providing Musk with incomplete or unusable information,” the letter said. He also said the information is critical to Twitter’s business and financial performance and is necessary to complete the merger agreement.
“This is a disaster scenario for Twitter and its board,” Wedbush analyst Dan Ives wrote in a note to investors on Friday. He predicted a lengthy court battle over Twitter to reinstate the deal or receive a $1 billion breakup fee specified in the contract. “From the beginning, this was always a scramble to go after Twitter for a $44 billion price tag for Musk, and it never made much sense for the Street, now it ends up (for now) in a Twilight Zone that ends with Board Twitter against the wall. and many on the street are scratching their heads for what comes next.”
On Thursday, Twitter sought to clarify how it accounts for spam accounts in a conference call with reporters and company executives. Twitter said it removes 1 million spam accounts a day. spam accounts represent less than 5% of its active user base each quarter. To calculate how many accounts are malicious spam, Twitter said it analyzes “thousands of randomly sampled accounts,” using public and private data such as IP addresses, phone numbers, geographic location and account behavior. when active, to determine if an account is genuine.
Last month, Twitter offered Musk access to its fire engine of raw data on hundreds of millions of daily tweets, according to various reports at the time, though neither the company nor Musk have confirmed this. Private data, which is not publicly available and therefore not in the firehose data provided to Musk, includes IP addresses, phone numbers and location. Twitter said this private data helps prevent real accounts from being misidentified as spam.
Ringler also claimed Twitter breached the deal when it fired its head of revenue products and general consumer manager, and announced the layoff of a third of its talent acquisition team. The sale agreement, he wrote, required Twitter to “seek and obtain consent” to deviate from normal business conduct. Twitter was required to “maintain substantially intact the material components of its current business organization,” the letter said.
Musk’s flirtation with buying Twitter appears to have started in late March. That’s when Twitter said it reached out to its board members — including co-founder Jack Dorsey — and told them it was buying shares in the company and was interested in joining the board, taking Twitter private or starting a competitor. Then, on April 4, he revealed in a regulatory filing that he had become the company’s largest shareholder after buying a 9% stake worth about $3 billion.
Twitter initially offered Musk a seat on its board. But six days later, Agrawal tweeted that Musk would not be joining the council after all. His attempt to buy the company came to fruition soon after.
Musk agreed to buy Twitter for $54.20 per share, inserting a “420” marijuana reference into its offer price. He sold about $8.5 billion in Tesla stock to help finance the acquisition, then stepped up his commitments of more than $7 billion from a diverse group of investors, including Silicon Valley heavyweights such as Oracle co-founder Larry Ellison.
Inside Twitter, Musk’s offer was met with confusion and plummeting morale, especially after Musk publicly criticized one of Twitter’s top lawyers involved in content moderation decisions.
As Twitter executives prepared to move forward on the deal, the company imposed a hiring freeze, suspended discretionary spending and fired two top executives. The San Francisco company is also laying off employees, most recently part of its talent acquisition team.
