Twitter slips as Elon Musk says he's terminating purchase deal; company plans lawsuit (updated)
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Twitter stock (NYSE:TWTR) has slid 5.3% postmarket as Elon Musk says he's terminating his $44B deal to purchase the company.
An SEC filing from Musk's advisers says that on Friday, they sent a letter to Twitter giving formal notification that he's terminating the merger agreement.
They're claiming grounds of a material adverse effect based on the company's reporting around spam and fake accounts.
"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)," Musk's team says.
Tesla (TSLA) stock has inched higher after hours, +1%; Digital World Acquisition Corp., the special-purpose acquisition company bringing Donald Trump's Truth Social public, is up 13.5% postmarket.
Musk's team also claims that he's run into roadblocks in trying to get needed information from the company: "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 Twitterâs platform' ... Twitter has failed or refused to provide this information. Sometimes Twitter has ignored Mr. Muskâs 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."
Musk "has reason to believe that the true number of false or spam accounts on Twitterâs platform is substantially higher than the amount of less than 5% represented by Twitter in its SEC filings," Musk's camp goes on to say. "Twitterâs true (monetizable daily active user) count is a key component of the companyâs business, given that approximately 90% of its revenue comes from advertisements."
What's next? Twitter execs this week freshly indicated they fully intended to complete the deal, so barring a settlement, this big deal looks headed for a big court date.
Musk is in Sun Valley, Idaho, having arrived at the Allen & Co. conference - a haven and dealmaking spot for media moguls - on Thursday night. On Saturday morning, he'll get the marquee speaking slot on the conference's last day, in place of usual industry titans such as Warren Buffett. He may or may not address the deal then. Twitter CEO Parag Agrawal is also there.
Updated 5:43 p.m.: Musk's $44B deal called for him to pay $54.20 per Twitter (TWTR) share. With the stock down 7.1% after hours to $34.21, current price is about a 37% discount to Musk's offer - the largest spread in the deal since Musk announced it. DWAC is now up 14.6%; TSLA
+1.2%.
Updated 5:53 p.m.: Twitter (TWTR) Chairman Bret Taylor speaks. "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. We are confident we will prevail in the Delaware Court of Chancery."