Elon Musk's tumultuous $44 billion bid to buy Twitter was on the verge of collapse Friday after the Tesla CEO sent a letter to Twitter's board saying he was terminating the acquisition.
The chair of Twitter's board, Bret Taylor, tweeted Friday that the board was "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."
Twitter could have pushed for a $1 billion breakup fee Musk agreed to pay under these circumstances. Instead, it looks ready to fight over the deal, which the company's board has approved and CEO Parag Agrawal has insisted he wants to consummate.
The possible unraveling of the deal is just the latest twist in a saga between the world's richest man and one of the most influential social media platforms. Much of the drama has played out on Twitter, with Musk — who has more than 100 million followers — lamenting that the company was failing to live up to its potential as a platform for free speech.
On Friday, shares of Twitter fell 5% to $36.81, well below the $54.20 that Musk had offered to pay. Shares of Tesla, meanwhile, climbed 2.5% to $752.29.
Request for data
Musk lawyer Mike Ringler wrote in the letter to Twitter dated Friday that for nearly two months, Musk has sought data to judge the prevalence of "fake or spam" accounts on the social media platform. "Twitter has failed or refused to provide this information," the letter said.
It also said the information was fundamental to Twitter's business and financial performance, and it was needed to finish the merger agreement.
"From the beginning this was always a head scratcher to go after Twitter at a $44 billion price tag for Musk and never made much sense" to the investment community, Wedbush analyst Daniel Ives wrote in a note to investors after the letter was published, “now it ends (for now) in a Twilight Zone ending with Twitter's Board back against the wall and many on the Street scratching their head around what is next."
On Thursday, Twitter sought to shed more light on how it counts spam accounts in a briefing with journalists and company executives. Twitter said it removes 1 million spam accounts each day. The spam accounts represent well below 5% of its active user base each quarter. To calculate how many accounts are malicious spam, Twitter said it reviews "thousands of accounts" sampled at random, using both public and private data such as IP addresses, phone numbers, geolocation and how the account behaves when it is active, to determine whether an account is real.
Last month, Twitter offered Musk access to its "firehose" of raw data on hundreds of millions of daily tweets, according to multiple reports at the time, though neither the company nor Musk confirmed this. Private data, which isn't available publicly and thus not in the data "firehose" that was given to Musk, includes IP addresses, phone numbers and location. Twitter said such private data helps avoid misidentifying real accounts as spam.
Ringler also alleged that Twitter broke the agreement when it fired its revenue product leader and general manager of consumers, as well announcing the layoff of one-third of its talent acquisition team. The sale agreement, he wrote, required Twitter to "seek and obtain consent" if it deviated from conducting normal business.
How it began
Musk's flirtation with buying Twitter appeared to begin in late March. That's when Twitter has said he contacted members of its board and told them he was buying up shares of the company and interested in either joining the board, taking Twitter private or starting a competitor. Then, on April 4, he revealed in a regulatory filing that he had become the company's largest shareholder after acquiring a 9% stake worth about $3 billion.
At first, Twitter offered Musk a seat on its board. But six days later, Agrawal tweeted that Musk would not be joining the board after all. His bid to buy the company came together quickly after that.
Musk had agreed to buy Twitter for $54.20 per share. He sold roughly $8.5 billion worth of shares in Tesla to help fund the purchase, then strengthened his commitments of more than $7 billion from a diverse group of investors.
Inside Twitter, Musk's offer was met with confusion and falling morale, especially after Musk publicly criticized one of Twitter's top lawyers involved in content-moderation decisions.
As Twitter executives prepared for the deal to move forward, the company instituted a hiring freeze, halted discretionary spending and fired two top managers. The San Francisco company has also been laying off staff, most recently part of its talent acquisition team.