It has been apparent for weeks: Tech billionaire Elon Musk is backing down on the Twitter purchase. His lawyers point to allegedly incomplete information on the number of fake accounts on the online service. The stock is going down.
Tech billionaire Elon Musk has canceled his deal to buy Twitter. As a reason, his lawyers referred to allegedly insufficient information on the number of fake accounts, according to a statement published by the US Securities and Exchange Commission on Friday. Musk had publicly questioned the Twitter numbers for weeks, which observers interpreted as an attempt to at least push the price down. Twitter shares fell more than 6 percent in after-hours trading after the announcement.
Musk has been trying since mid-May to address Twitter’s allegedly false estimates of the number of spam and fake accounts. He therefore already declared the takeover deal to be suspended. Musk’s lawyers said Twitter had failed to provide Musk and his advisory staff with the data they needed to verify fake account information for nearly two months. They describe this as such a serious breach of the terms of the contract that the purchase agreement could be terminated.
Long legal battle between Elon Musk and Twitter is imminent
But Musk shouldn’t be off the hook that easily – a protracted legal battle looms. He and Twitter have agreed to a $1 billion penalty if either party backs out of the deal. But if Twitter insists on enforcement, it should still be legally difficult for Musk. The company had repeatedly emphasized that it wanted to enforce the deal.
Musk offered shareholders $54.20 per share. That would be a good deal for them: Even before Musk’s announcement on Friday, the paper was only $ 36.81 from US trading. Observers had speculated that given the price difference, Musk was no longer willing to stick to the original bid.