Elon Musk pulled the plug on his $44 billion deal to buy Twitter on Friday, accusing the company of “misleading” statements about the number of fake accounts, a regulatory filing showed.
Musk terminating the deal that he inked in April to buy the social media giant sets the stage for an epic court battle over a billion-dollar breakup fee and more.
“Mr. Musk hereby exercises (the) right to terminate the Merger Agreement and abandon the transaction,” his lawyers said in a letter to Twitter, a copy of which was filed with the Securities and Exchange Commission.
Musk’s change of heart about buying Twitter appeared to suggest some “buyer’s remorse” for offering a price of $54.20 per share that now appears “laughable,” CFRA Research senior equity analyst Angelo Zino said in a note to investors before the deal was officially nixed.
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Twitter has held firm that no more than five percent of accounts are run by software instead of people, while Musk has said he believes the number to be much higher.
The clock was ticking for Musk to make a decision, with Twitter’s board recommending shareholders approve the buyout at a special vote expected to be held in August.
“The Twitter deal has clearly caused chaos at Twitter and has resulted in an overhang on Tesla’s stock since April given the Musk financing angle, coupled by a brutal market backdrop for risk,” Wedbush analyst Dan Ives said in a note to investors.
Musk used a chunk of his fortune in Tesla shares to back loans to buy Twitter, but as the tumult and market factors push down the electric car maker’s stock price, he has been hit with margin calls to cover any decrease.
“I am sure Musk thought he could come out of the gate strong, generate a wave of buzz and then ride it to get investors who want a piece of something that looks like it is going to be big,” said Angelo Carusone, president of nonprofit group Media Matters for America.
“His erratic behavior obviously affected the price of Tesla shares, which undermined the financing everything was set on.”
Concerns about Tesla included worries that its chief executive was being distracted by the Twitter saga, and that the tech platform would certainly demand his attention if he owned it.
Musk proclaimed in May that he would generally let anyone say anything allowed by law on Twitter, becoming a hero to ultra-conservatives offended by efforts to curb bullying, lies and other abuses on the platform.
His comments came during a key annual event at which Twitter and other social media companies typically lock in bulk ad contracts worth hundreds of millions of dollars.
What Musk promised to do at Twitter to make it more of a free-for-all would scrap precautions that brands want in place to make sure their ads aren’t associated with abusive or troubling posts, Carusone said.
Meanwhile, Musk faces a lawsuit accusing him of pushing down Twitter’s stock price in order to either give himself an escape hatch from his buyout bid.