Twitter has accused Tesla's chief executive Elon Musk for "knowingly, intentionally, willfully and materially" breaching an agreement to buy over the social media company, after Musk backed out of the US$44 billion deal on 8 July.
Twitter released a statement then that it is committed to closing the transaction on the price and terms agreed upon with Musk, and plans to pursue legal action in Delaware to enforce the merger agreement. Twitter intends to file the lawsuit early this week, Reuters reported.
According to a regulatory filing seen by MARKETING-INTERACTIVE , Twitter sent a letter to Musk saying that it had not breached its obligations under the merger agreement. "Twitter demands that Musk and the other Musk Parties comply with their obligations under the Agreement, including their obligations to use their respective reasonable best efforts to consummate and make effective the transactions contemplated by the Agreement," the letter said.
Meanwhile, Musk said in a filing last Friday that he was backing out of the deal as Twitter breached multiple provisions of the agreement, including failing to turn over sufficient data on fake or spam accounts and letting go of high-ranking executives and a third of the talent acquisition team, multiple sources such as Reuters and The Business Times reported.
The fallout between Musk and Twitter has also caused Twitter's stock to plummet. According to Reuters and BT , Twitter's shares fell 11.3% to finish at US$32.65, the biggest daily percentage drop in more than 14 months. Musk remains unfazed about the media spotlight surrounding him, even tweeting a meme mocking Twitter.
This latest hullabaloo adds to the saga that began earlier this year when Twitter finally agreed to sell the company to Musk for US$44 billion after initially resisting it by adopting a limited duration shareholder rights plan. The rights plan will reduce the likelihood that any entity, person or group gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or without providing the board sufficient time to make informed judgments and take actions that are in the best interests of shareholders. While Twitter was fighting off Musk, media outlets including Reuters reported that private equity firms including Thoma Bravo expressed interest in acquiring Twitter.
Just days after agreeing to sell, Twitter admitted to overstating user numbers for approximately three years. This follows its Q1 2022 results since the company agreed to be bought out by Tesla chief Elon Musk for US$44 billion. Twitter previously miscalculated user numbers for more than three years in 2017, as reported by The Wall Street Journal previously.
The company explained in its financial earnings release that an error was made in March of 2019 when it launched a feature that allowed users to link multiple separate accounts together to conveniently switch between accounts. As a result of the error, actions taken via the primary account resulted in all linked accounts being counted as monetisable daily active users (mDAU). "This resulted in an overstatement of mDAU from Q1 2019 through Q4 2021," Twitter said.
While Twitter has routinely declared in securities filings that less than 5% of its daily active users are bots, Musk has disputed that figure, according to NBC News . NBC News also reported that Musk does not believe Twitter's lax testing methodologies are adequate and hence wants to conduct his own analysis using the requested data.
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