“The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement,” Twitter board chair Bret Taylor said in a tweet Friday, echoing earlier statements by the company that it planned to follow through with the deal. “We are confident we will prevail in the Delaware Court of Chancery.”
Twitter shares fell nearly 6% in after-hours trading Friday immediately following the news, after ending the day down 5%. Tesla stock gained more than 1% in after-hours trading.
Still, Musk’s lawyer alleged in the Friday letter that Twitter has “not complied with its contractual obligations” to provide Musk with sufficient data, and said Twitter “appears to have made false and misleading representations upon which Mr. Musk relied” when agreeing to the deal.
“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,'” the Friday letter reads. “This information is fundamental to Twitter’s business and financial performance and is necessary to consummate the transactions contemplated by the Merger Agreement.”
It continues: “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.”
Twitter has repeatedly said it has cooperatively shared information with Musk in order to close the deal at the originally agreed upon terms.
Twitter’s stock is trading around $36, down nearly 30% since its price the day Musk and Twitter announced the acquisition and well below the $54.20 per share Musk offered, suggesting deep skepticism among investors about the deal going through at the agreed upon price. The declining value may also be among the reasons Musk is no longer interested in the deal, analysts have said.
What could happen next
In accusing Twitter of materially breaching the merger agreement, Musk appears to be setting up the argument that he should not be on the hook for the $1 billion set out in the deal terms as a breakup fee in the event the acquisition fell through, according to Carl Tobias, a law professor at the University of Richmond.
“The way these things usually work is that if there’s a billion-dollar breakup fee and you’re the one trying to acquire, then that is enforced against you,” Tobias said, “unless there’s some kind of material breach or some kind of reason that can be offered up that persuades a…
Read More: Elon Musk tells Twitter he wants out of his deal to buy it