Elon Musk Pulls Out of $44B Twitter Deal

Tesla and SpaceX CEO Elon Musk has decided to pull out from his $44 billion deal to acquire Twitter, claiming the social media giant had provided him with false and misleading information.

The announcement was made in a letter addressed to Twitter’s chief legal officer Vijaya Gadde on 8 July — and filed with the U.S. Securities and Exchange Commission (SEC) — in which Musk explains he is terminating the merger agreement due to Twitter breaching multiple provisions of the deal. The letter also noted that the social media giant “appears to have made false and misleading representations” that Musk had relied upon before making his decision to purchase the company.

The letter claims that among other things, Twitter has not been very clear about two pieces of data that were important to the deal, those being its “process for auditing the inclusion of spam and fake accounts” in monetizable daily active users (mDAU), and its “process for identifying and suspending spam and fake accounts”. The letter reads:

“Twitter has not provided information that Mr. Musk has requested for nearly two months notwithstanding his repeated, detailed clarifications intended to simplify Twitter’s identification, collection, and disclosure of the most relevant information sought in Mr. Musk’s original requests.”

One of the main reasons Musk signed the merger agreement was Twitter’s claims that it had fewer than 5% fake and spam accounts on its platform. While the social media giant has yet to provide complete information on that claim, a preliminary analysis of the data has lead Musk to “strongly believe that the proportion of false and spam accounts included in the reported mDAU count is wildly higher than 5%”.

While Twitter’s board originally disagreed with Musk’s plan to buy the company — adopting a “poison pill” tactic at the time to counter his takeover — it now appears they are set on completing the transaction. Twitter chairman Bret Taylor quickly responded to Musk’s letter, saying the board was “committed to closing the transaction on the price and terms agreed upon”, and that it plans to pursue legal action to enforce the merger agreement.