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Elon Musk is officially trying to pull the plug on the $44 billion deal to buy Twitter. In an SEC filing, Musk’s lawyers said the Tesla CEO wishes to terminate the agreement because of “false and misleading representations” made by Twitter.
In a statement, Twitter’s Board of Directors said it still “intends to close the transaction” and would take legal action against Musk. “We are committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plan to pursue legal action to enforce the merger agreement,” the board said. “We are confident we will prevail in the Delaware Court of Chancery.”
Twitter and Musk have been squabbling for months over how the company counts the number of bots and fake accounts on the platform. In the letter filed with the SEC, Musk’s lawyers state that Twitter has both withheld information and misled Musk about the true numbers.
Twitter has long stated that fake accounts make up less than 5 percent of its total daily users, and it turned over some of its internal “firehose” of data to Musk to bolster those claims. But the additional data hasn’t been enough to appease Musk, who has continued to challenge Twitter’s official estimates.
In the SEC filing, Musk’s lawyers state that “although Twitter has not yet provided complete information to Mr. Musk that would enable him to do a complete and comprehensive review of spam and fake accounts … it appears Twitter is dramatically understating” the number. "Preliminary analysis by Mr. Musk’s advisors of the information provided by Twitter to date causes Mr. Musk to strongly believe that the proportion of false and spam accounts included in the reported mDAU count is wildly higher than 5%," they told the SEC, without detailing their evidence.
A Twitter spokesperson referred to the statement from the company's board of directors saying the company would take legal action to force the deal to close. Earlier on Friday, The Financial Times reported that Twitter is "willing to go to war" to close the deal, and that CEO Parag Agrawal has been "more aggressive internally."
It's not clear what happens next, but it seems Musk and Twitter are likely headed toward a lengthy legal battle. The news is particularly grim for Twitter, which has already lost billions of dollars off its market cap, halted most of its hiring and laid off nearly 100 employees in an attempt to cut costs as it works toward a deal. A long legal fight is also likely to exacerbate anxiety among Twitter employees who have have already been worried about what their future might hold under a Musk-owned company.