Elon Musk pulled the plug on his $44 billion deal to buy Twitter on Friday, accusing the company of “misleading” claims about the number of fake accounts, a regulatory filing showed.
Musk is ending the deal he signed in April to buy the social media giant, setting the stage for an epic court battle over a billion-dollar breakup fee and more.
“Mr. Musk hereby exercises (his) right to terminate the merger agreement and to terminate the transaction,” his attorneys said in a letter to Twitter, a copy of which has been filed with the Securities and Exchange Commission.
Musk’s change of heart about buying Twitter seemed to indicate some “buyer remorse” for having offered a price of $54.20 per share that now seems “ridiculous,” said Angelo Zino, CFRA’s senior equity analyst Research, in a note to investors before the deal was officially canceled.
Twitter notes that no more than five percent of accounts are run by software rather than humans, while Musk said he believes the number is much higher.
The clock was ticking for Musk to make a decision, and Twitter’s board of directors recommended shareholders approve the buyout in a special vote expected to take place in August.
“The Twitter deal has clearly wreaked havoc on Twitter, resulting in an overhang in Tesla’s shares since April given Musk’s funding angle coupled with a brutal market backdrop to risk,” Wedbush analyst Dan Ives said in a note to the company investors.
Musk has invested some of his wealth in Tesla stock to cover loans to buy Twitter, but as the turmoil and market factors push the electric carmaker’s share price lower, he has been hit with margin calls to offset any decline.
– ‘Wrong behavior’ –
“I’m sure Musk thought he could come out of the gate strong, create a surge of excitement, and then ride it to attract investors who want a piece of something that looks like it’s going to be big,” said Angelo Carusone, President of non-profit group Media Matters for America.
“His erratic behavior has obviously had an impact on Tesla’s stock price, which has undermined the funding that everything was geared towards.”
Concerns surrounding Tesla included concerns that its CEO has been distracted by the Twitter saga and that the tech platform would certainly require his attention if he owned it.
Musk proclaimed in May that he would generally allow anyone to say anything the law allows, and became a hero to die-hards who have been offended by efforts to curb bullying, lying and other abuses on the platform.
His comments came during a major annual event where Twitter and other social media companies typically land hundreds of millions of dollars worth of bulk ad deals.
What Musk promised to do on Twitter to make it more of a free-for-all would remove precautions brands want to take to ensure their ads aren’t associated with abusive or disturbing posts, Carusone said.
Meanwhile, Musk is facing a lawsuit accusing him of dragging down Twitter’s stock price to get himself a way out of his takeover bid.
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