Tesla CEO, Elon Musk have announced his decision to pull the plug on his $44 billion deal to buy Twitter accusing the company of ‘misleading’ statements about the number of fake accounts, a regulatory filing revealed on Friday.
By pulling out of the April purchase agreement, Musk opened the door to a protracted legal battle including a billion-dollar breakup fee and other issues.
‘Mr. Musk hereby exercises (the) right to terminate the Merger Agreement and abandon the transaction,’ his lawyers disclosed in a letter to Twitter, a copy of which was filed with the Securities and Exchange Commission.
Musk’s change of mind about buying Twitter appeared to suggest some ‘buyer’s remorse’ for offering a price of $54.20 per share that now appears ‘laughable,’ CFRA Research senior equity analyst Angelo Zino pointed out in a note to investors before the deal was officially terminated.
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While Musk has asserted that he thinks the percentage is significantly higher, Twitter has maintained that no more than 5% of accounts are managed by software rather than people.
Musk was under pressure since Twitter’s board had recommended that shareholders support the purchase during a special vote that was scheduled to take place in August.
‘The Twitter deal has clearly caused chaos at Twitter and has resulted in an overhang on Tesla’s stock since April given the Musk financing angle, coupled by a brutal market backdrop for risk,’ Wedbush analyst Dan Ives said in a note to investors.
Musk used a chunk of his fortune in Tesla shares to back loans to buy Twitter, but as the tumult and market factors push down the electric car maker’s stock price, he has been hit with margin calls to cover any decrease.
‘I am sure Musk thought he could come out of the gate strong, generate a wave of buzz and then ride it to get investors who want a piece of something that looks like it is going to be big,” said Angelo Carusone, president of nonprofit group Media Matters for America.
‘His erratic behavior obviously affected the price of Tesla shares, which undermined the financing everything was set on.’
Concerns about Tesla included worries that its chief executive was being distracted by the Twitter saga, and that the tech platform would certainly demand his attention if he owned it.
Musk proclaimed in May that he would generally let anyone say anything allowed by law on Twitter, becoming a hero to ultra-conservatives offended by efforts to curb bullying, lies and other abuses on the platform.
Meanwhile, Musk faces a lawsuit accusing him of pushing down Twitter’s stock price in order to either give himself an escape hatch from his buyout bid.