Twitter contract canceled: Elon Musk wasn't impressed

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Elon Musk has officially called off the Twitter takeover, citing issues such as bogus accounts and transparency.

Twitter is left with few choices, including demanding a $1 billion breakup fee, but the company's management and board appear to be in the mood to go on an apparent lengthy legal struggle to force Musk to stick to his commitments.

Elon Musk has officially called off the Twitter takeover proposal, as many had suspected. Musk announced on Friday that he will withdraw his contentious $44 billion bid for Twitter. He blamed Twitter for the deal's demise, claiming that the microblogging network failed to offer adequate information regarding fraudulent accounts.

Responding quickly to Musk's decision, Twitter announced that the business will sue Tesla CEO in order to maintain the arrangement.

The newest twist in the ongoing tale of the Twitter purchase agreement between the world's richest man and the world's most powerful social media platform. Elon Musk's decision to cancel the Twitter transaction heralds the start of a huge court struggle in the coming weeks.

Twitter may have requested a $1 billion breakup fee, which Musk would be willing to pay in these circumstances. Instead, it appears that the corporation is preparing to battle for the conclusion of the Twitter takeover agreement, which was authorized by the company's board after many turns and twists.

Musk's lawyer, Mike Ringler, complained to Twitter's board of directors that his client had been collecting data for over two months to assess the prevalence of fraudulent or spam accounts on the social media network.

“Twitter has failed or refused to provide this information. Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information,” the letter said.

Musk argued that the information was critical to completing the transaction and gaining a deeper knowledge of Twitter's financial and commercial performance.

Twitter's Board Chair, Bret Taylor, replied by stating that the company was "committed" to finalizing the purchase on Musk's conditions and price. He also claimed that they want to sue to enforce their acquisition agreement. He is convinced that he will prevail in the legal struggle that will be contested at the Delaware Court of Chancery. The Delaware trial court is well-known for managing numerous commercial disputes involving firms, including Twitter.

The Twitter Board is 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.
— Bret Taylor (@btaylor) July 8, 2022

Musk, who has over 100 million followers, argued that Twitter was not living up to its potential as a free expression medium.

Twitter shares slumped 5% to $36.81 on Friday. This is far less than Musk's $54.20 bid. Tesla shares, on the other hand, climbed 2.5 percent to $752.29.

Wedbush analyst Dan Ives noted in a note to investors that this was a disaster scenario for Twitter and its board. He predicted a protracted legal struggle between Twitter and Musk to either restore the purchase contract or recover $1 billion in breakup costs.

Twitter attempted to address Elon Kusk's concerns about phony Twitter accounts a few weeks ago. In a conference with journalists and executives on Thursday, the business sought to disclose further details on its spam account count once more. Twitter promises to remove 1,000,000 spam accounts every day. While the figure appears to be large, it accounts for fewer than 5% of Twitter's active users per quarter. Twitter claims that it randomly evaluates "thousands" of accounts to determine if they are real or fraudulent, utilizing both private and public data such as location, IP addresses, phone numbers, and account activity while active.

According to various accounts, Twitter reportedly provided Musk with access to a "fire hose" of raw data including hundreds of millions of tweets every day. Neither Musk nor the corporation, however, acknowledged this.

Musk's interest in Twitter privatization stemmed mostly from his notion that he could add value to Twitter by eradicating spam bots - a concern he now uses to justify his decision to cancel the Twitter takeover agreement.

"This whole process was weird," said Christopher Bouzy, founder of Bot Sentinel, a research business. Bouzy's organization monitors bogus Twitter accounts that are trolling, harassing, or spreading incorrect information. He considers it odd that Musk is backing out of the contract, claiming bots, trolls, and inauthentic accounts as reasons, despite being fully aware of the issue.

But, at the same time, Bouzy backs up the legal concerns voiced by Musk's team. He deemed it to be "legitimate accusations of Twitter's intransparency" and criticized the apparent unwillingness to provide Musk the same degree of access to internal data as its major clients.

Bouzy stated that it appeared as if they were concealing something. He also claimed that Twitter had more spam or phony accounts than the business disclosed.

Musk's lawyer argued that when Twitter sacked two of its top executives and took off a fifth of its talent acquisition personnel, it broke the agreement. He noted that Twitter was compelled by the selling agreement to "reach out and acquire approval" for any deviation from usual business operations. According to the letter, Twitter must "maintain substantially intact the significant components of its present organization."

It's evident that the Twitter purchase bid drama is far from done, and there will be much more published about it in the coming days.