Elon Musk Terminates Twitter Acquisition Citing ‘Material Breach’
2022.07.09 02:35
Elon Musk Terminates Twitter (TWTR) Acquisition Citing ‘Material Breach’
Elon Musk said he is terminating his agreement to acquire Twitter (NYSE:TWTR) for $54.20 per share, saying the company is in material breach of multiple provisions of that agreement and appears to have made false and misleading representations which Mr. Musk relied upon.
Musk’s attorney, Mike Ringler from Skadden, Arps, Slate, Meagher & Flom LLP, said section 6.4 of the Merger Agreement requires Twitter to provide Mr. Musk and his advisors all data and information that Mr. Musk requests “for any reasonable business purpose related to the consummation of the transaction”. Ringler said Twitter has not complied with its contractual obligations.
“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” (our letter to you dated May 25, 2022 (the “May 25 Letter”)),” the letter from Ringler states. “This information is fundamental to Twitter’s business and financial performance and is necessary to consummate the transactions contemplated by the Merger Agreement because it is needed to ensure Twitter’s satisfaction of the conditions to closing, to facilitate Mr. Musk’s financing and financial planning for the transaction, and to engage in transition planning for the business. 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.”
Ringler said Mr. Musk and his financial advisors at Morgan Stanley (NYSE:MS) have been requesting critical information from Twitter as far back as May 9, 2022 – and repeatedly since then – on the relationship between Twitter’s disclosed mDAU figures and the prevalence of false or spam accounts on the platform. “Notwithstanding these repeated requests over the past two months, Twitter has still failed to provide much of the data and information responsive to Mr. Musk’s repeated requests,” the letter goes on to state.
The attorney said despite public speculation on this point, Mr. Musk did not waive his right to review Twitter’s data.
“As Twitter has been on notice of its breach since at least June 6, 2022, any cure period afforded to Twitter under the Merger Agreement has now lapsed,” the letter adds. “Accordingly, Mr. Musk hereby exercises X Holdings I, Inc.’s right to terminate the Merger Agreement and abandon the transaction contemplated thereby, and this letter constitutes formal notice of X Holding I, Inc.’s termination of the Merger Agreement pursuant to Section 8.1(d)(i) thereof.”
Shares of Twitter fell an additional 5% after-hours following the news.
Shares of Twitter closed with a merger arb spread of 47.2% on Friday, suggesting Wall Street traders had already seen little chance that the deal would close.
By StreetInsider.com Staff
