American billionaire Elon Musk on Friday, 8 July, terminated his $44 billion deal to buy Twitter, accusing the tech company of making "false and misleading representations" about the prevalence of fake accounts on its platform.
"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," Musk's lawyers said in a regulatory filing.
Musk and his financial advisors have been requesting critical information from Twitter as far back as 9 May and repeatedly since then, the filing stated.
Responding to the withdrawal, Twitter's Chairperson Bret Taylor said the board will pursue legal action to enforce the merger agreement, and that they were confident of prevailing.
"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," he tweeted.
CEO Parag Agrawal retweeted Taylor's tweet.
Twitter Employees Asked Not To Comment Publicly
Twitter employees have been asked not to publicly comment on the deal. An internal memo said that they should stay away from Tweeting, slacking or sharing any comments about the merger agreement, The Verge reported.
After the news of Musk backing out of the deal broke out, Twitter employees had tweeted humorously about the situation.
Company shares took a hit after the news broke, sinking by nearly 9 percent, as per Bloomberg.
What Lies Next for Musk in the Court?
Notably, the terms of the buyout deal require the Tesla owner to pay a $1 billion breakup fee if he does not complete the transaction.
In the Delaware court, where disputed mergers and acquisitions often land up, the legal battle usually ends up with the companies re-negotiating deals or the acquirer paying the target a settlement to walk away, as per a Reuters report.
A lawsuit had been filed against Musk by Twitter investors in May as well, accusing him of pushing down Twitter's stock price in order to give himself an escape hatch from his buyout bid.
According to the complainants, Musk posted some tweets and made some statements intended to create doubt about the $44 billion deal and create room for negotiating a discount or backing out of it entirely.
This had come after Musk said he was putting the deal "temporarily on hold" until Twitter shows proof that bots and spam accounts constitute less than five percent of its daily average users.
Musk's Deal With Twitter & the Falling Out
Tesla CEO Musk had inked the deal to acquire Twitter in April this year, for $44 billion, at $54.20 a share.
In May, the American magnate had put the deal "temporarily on hold" while he checked the veracity of the company's claim that spam and fake accounts make up less than 5 percent of users.
He declared that the purchase will not move forward until the social media platform shows proof of the same.
At the same time, he had clarified that he was still committed to the acquisition.
In June, Musk had threatened to walk away from the deal if the company failed to provide data on spam and fake accounts.
Soon after that, the social media giant had decided to provide Musk the access to its "firehose" of raw data on hundreds of millions of daily tweets.