Twitter has fired back at Elon Musk, denying it breached the agreement with the world’s richest person, and accusing him of rather “knowingly” breaching the agreement to buy the social media firm in the famous US$44-billion deal.
In a letter sent to Musk, dated Sunday and filed with regulators on Monday, Twitter said it had not breached its obligations under the merger agreement as indicated by Musk on Friday, in an attempt to end the deal.
“Twitter demands that Mr Musk and the other Musk parties comply with their obligations under the agreement, including their obligations to use their respective reasonable best efforts to consummate and make effective the transactions contemplated by the agreement,” the letter said.
The company has planned to sue Musk to force him to complete the deal, a threat he laughed off on Monday, when he sent a series of tweets joking about Twitter and its threat to enforce the agreement in court. Twitter is planning to file a lawsuit early this week in Delaware, people familiar with the matter said.
Twitter said in the letter that the merger agreement remained in place, adding it would take steps to close the deal.
Twitter’s shares ended down 11.3% at $32.65, a 40% discount to Musk’s $54.20 bid and the biggest daily percentage drop in more than 14 months. They rebounded less than 1% in extended trading. Traders short selling Twitter’s tumbling stock made $148-million in mark-to-market profits on Monday, according to S3 Partners.
“Twitter’s board must contemplate the potential harm to its employee and shareholder base of any additional internal data exposed in litigation,” Benchmark analyst Mark Zgutowicz said.
Francis Pileggi, a corporate litigator with Lewis Brisbois in Delaware, said Musk could put the social media giant’s so-called “bots” front and centre in future litigation if he defends against Twitter’s lawsuit by claiming the company misrepresented the number of fake accounts. “I’d be surprised if he’s prohibited from getting that information,” Pileggi said.
Pileggi said if the number of fake accounts is many times higher than the 5% estimated by Twitter, it could lead to negotiations for a reduced price for the social media platform.
Legal experts say the 16-year-old social media company has a strong legal case against Musk, but could opt for a renegotiation or settlement instead of a long court fight.
“We believe that Elon Musk’s intentions to terminate the merger are more based on the recent market selloff than … Twitter’s ‘failure’ to comply with his requests,” Jefferies analyst Brent Thill wrote in a note. “In the absence of a deal, we would not be surprised to see the stock find a floor at $23.50.”