Elon Musk Walks Away from Twitter Deal, Board Committed to Enforcing it

Musk Pulls Abandons the Deal

An SEC filing late on Friday, revealed that Mr Musk is terminating the Merger Agreement, claiming that Twitter is in material breach of multiple of its provisions ^[1], sending the stock lower in extended-trading.

The key reason behind the move, is non-other than the thorny issue of the number of fake/spam accounts on the social media platform, which had first emerged in mid-May.

Twitter has disclosed that such accounts, amount to less than 5% of its users ^[2], but Tesla's CEO had expressed concerns about the figure and had gone as far as declaring the deal "temporarily on hold", until he can get further clarifications. ^[3].

Friday's letter by Mr Musk's legal team, claims that Twitter has not satisfied requests for further clarifications on the matter and that it has "not complied with its contractual obligations".

Not the End of the Saga?

The Musk-Twitter saga had started all the way back in April, when it was revealed that he had bought an approximately 9% stake in the microblogging company ^[4]. The two sides reached an agreement in late-April, under which, Mr Musk would acquire Twitter for $54.20 per share and take it private. ^[5].

In typical Musk fashion, much fanfare has accompanied the agreement and doubts over its conclusion had emerged multiple times before, especially after the public dispute over fake accounts broke out. The latest news of Mr Musk pulling the plug on the merger, will hardly be the final episode it this seemingly never-ending saga.

The Chairman of Twitter, Bret Taylor, said that the Board is "committed in closing the transaction" and will "pursue legal action" in order to enforce the agreement ^[6], which has an $1 billion termination fee. ^[7].

It looks like the fate of the agreement could be decided in the courts and remains to be seen what is Mr Musk's endgame. Interestingly enough, Texas Attorney General Ken Paxton took an interest in the fake accounts dispute, as he launched an investigation last month, against Twitter, for potentially deceiving consumers. ^[8]

It is worth noting, that Texas is home to the new Giga factory of Tesla Motors Inc (TSLA) and also where the company recently moved its headquarters.

Tesla Impact

TSLA.us has erased nearly 40% of its value during the second quarter of the year, during which the Twitter takeover saga by its CEO played out, although it hard to single this out as the primary cause, since the broader stock market and the tech sector in particular also plunged during the same period.

However, Mr Musk has gone on a torrent of tweets and comments around the deal, which were often erratic, creating speculation around his motives and his willingness to complete the agreement.
It remains to be seen whether this behavior, along with other factors, will begin to erode the Tesla brand, which is the undisputed king of the electric vehicle market.