Elon Musk's Twitter deal fell through
He accuses Twitter of posting "false and misleading" information about the number of fake and spam accounts
Gabriel Thomas (GT)May 8, 2025
Elon Musk has told Twitter that he intends to end his agreement to buy the social media giant for $44 billion. He accuses Twitter of posting "false and misleading" information about the number of fake and spam accounts.
Musk's attempt to get out of business sets the stage for a high-paying legal battle between the billionaire Tesla boss and the social media platform. Twitter Chairman Bret Taylor was quick to respond, stating that the board is "determined to complete the transaction at the price and terms agreed with Musk" and will take legal action to enforce the agreement.
"We are confident that we will prevail in the Delaware Court of Chancery," Taylor added, referring to the popular commercial litigation venue.
In a brief filed on Friday, the Tesla boss's lawyers alleged that Twitter violated several terms of the sale agreement and made false and misleading statements. The number of spam and fake accounts on the platform is "far higher" than the 5 percent estimated by Twitter, according to preliminary analysis by Musk's advisors, the lawsuit says.
Separately, according to the filing, Musk is reviewing whether Twitter's "sloping business prospects" and deteriorating financial prospects violate the agreement.
The filing also accused Twitter of failing to meet its obligation to "properly conduct its business" after CEO Parag Agrawal imposed a hiring freeze, fired two senior employees and announced this week that the company would lay off a third of its talent acquisition team .
Twitter's shares fell nearly 5 percent in after-hours trading.
The move is the latest twist in a dramatic story that began when Musk announced in early April that he had acquired a stake in Twitter to restore the platform's "free speech" ethos, fight spam, and reignite growth .
Weeks later, Musk sent Wall Street into an uproar when he announced his offer to acquire Twitter at $54.20 per share, which the company eventually accepted. He later explained that the deal was "temporarily on hold" because of doubts about whether Twitter had accurately reported the number of bots and spam accounts. Some analysts and Twitter insiders interpreted this as an expression of buyer regret and speculated that Musk was trying to get a cheaper offer.
Musk said Twitter's failure to provide information about fake accounts would make it problematic to secure funding from banks that agreed to lend him the money to complete the transaction.
The agreement provides for a $1 billion "rewind fee" that Musk would have to pay if he went out of business. However, if all other closing conditions, including funding, are met, Twitter may attempt to force Musk to close the deal. In the past, US courts have sided with sellers in litigation when buyers have attempted to cancel the deal to keep the acquirers from backing out on flimsy grounds.
Since Musk agreed to buy Twitter, the market caps of tech companies have plummeted, leaving the agreed valuation expensive compared to peers. Snap, one of Twitter's closest competitors, has fallen more than 65 percent this year.
When Musk secured funding for his $46.5 billion Twitter bid, he originally took out a $12.5 billion margin loan from a dozen lenders led by Morgan Stanley, who is associated with Tesla $62.5 billion worth of shares was collateralised.
In addition, it has received $13 billion in funding commitments from a consortium of 13 banks, requiring it to come up with the remaining $21 billion in cash. In May, Musk canceled the margin loan, bringing the equity portion of his bid to $33.5 billion.
Part of the margin loan was repaid as Musk raised more than $7 billion from investors including Larry Ellison, the billionaire founder of Oracle, venture capital firm Sequoia Capital, Saudi Prince Alwaleed bin Talal and cryptocurrency exchange Binance, alongside dozens of equity investors. The remainder of the margin credit facility fell away when it phased out the remaining $6.25 billion.
Musk has vowed to reinstate free speech on the platform, and in a recent interview with the Financial Times said he would reverse former President Donald Trump's "morally wrong" ban imposed after the deadly attack on the US Capitol was imposed on January 6, 2021.
The takeover process has thrown Twitter, which has already been criticized for its sluggish growth, into turmoil, and the remaining employees are unsure about their jobs and the future of the company.
