Elon Musk pulls out of Twitter purchase, but Twitter plans to sue to force the deal
When the richest person on Earth offered to buy Twitter for $44 billion, the eyes of the world pivoted to Elon Musk to watch the drama unfold. And the drama did not disappoint, played out over several month.
There has been speculation for some time that Musk's plans to buy Twitter would fall through, and those who predicted this may just have been proved right. Musk's lawyers have written to the social media company to say that the deal is now off, citing Twitter'ss failure to provide information that had been requested. Twitter has responded saying that it intends to sue Musk and force him to complete the merger.
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In correspondence dated July 8, lawyers for Elon Musk say to Twitter: "We refer to (i) the Agreement and Plan of Merger by and among X Holdings I, Inc., X Holdings II, Inc. and Twitter, Inc. dated as of April 25, 2022 (the "Merger Agreement") and (ii) our letter to you dated as of June 6, 2022 (the "June 6 Letter"). As further described below, Mr. Musk is terminating the Merger Agreement because 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, and is likely to suffer a Company Material Adverse Effect (as that term is defined in the Merger Agreement)".
While Section 6.4 of the Merger Agreement requires Twitter to provide Mr. Musk and his advisors all data and information that Mr. Musk requests "for any reasonable business purpose related to the consummation of the transaction", Twitter has not complied with its contractual obligations. For nearly two months, Mr. Musk has sought the data and information necessary to "make an independent assessment of the prevalence of fake or spam accounts on Twitter's platform" (our letter to you dated May 25, 2022 (the "May 25 Letter")). This information is fundamental to Twitter's business and financial performance and is necessary to consummate the transactions contemplated by the Merger Agreement because it is needed to ensure Twitter’s satisfaction of the conditions to closing, to facilitate Mr. Musk's financing and financial planning for the transaction, and to engage in transition planning for the business. Twitter has failed or refused to provide this information. Sometimes Twitter has ignored Mr. Musk's requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information.
Bret Taylor, chairman of Twitter, responded with a tweet, saying:
Many have questioned the sense in trying to force a sale. As Paul Graham asks: "Do you really want to be owned by someone who doesn't want to own you though?". One responder said:
But there is also the possibility that Musk could be forced into buying Twitter and would then take action -- such as immediately closing it down -- out of spite.
This is a legal battle which is unlikely to be concluded any time soon, and there is almost certainly going to be a lot of mudslinging in the meantime.
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