Elon Musk has given Twitter Inc (NYSE:TWTR) the cold shoulder in the latest sign that his proposed takeover of the social media platform has hit turbulent waters.
Shares in Twitter sank from US$38.97 to US$38.75 in the last hour of trading yesterday as it emerged that the deal could be in peril.
Musk’s entourage has reportedly ceased to engage in discussions with Twitter around funding the US$44bn takeover, the Washington Post reported, citing sources familiar with the matter.
The proposed takeover was expected to be financed with help from Fidelity International, crypto exchange Binance, venture capital firm Andreessen Horowitz, business magnate Larry Ellison, and the Qatari state.
At the time of the agreement, the deal valued Twitter’s shares at US$54.20 each, a 38% premium to its closing share price on April 1 and a big upside on their value today.
The breakdown in discussions is the latest blow to the technology entrepreneur’s plans to buy Twitter, after his lawyers claimed in early June that the social media platform was in “clear material breach” of the terms of the deal by withholding data around the volume of bots on the platform.
“Twitter’s latest offer to simply provide additional details regarding the company’s own testing methodologies, whether through written materials or verbal explanations, is tantamount to refusing Mr. Musk’s data requests,” Musk’s lawyers said in a letter updating the initial 13-D filing with the US Securities and Exchange Commission.
“Twitter’s effort to characterize it otherwise is merely an attempt to obfuscate and confuse the issue. Mr. Musk has made it clear that he does not believe the company’s lax testing methodologies are adequate so he must conduct his own analysis. The data he has requested is necessary to do so.”
Musk threatened to potentially pull out of the deal, claiming Twitter was “actively resisting and thwarting his information rights” under the merger agreement.
After he took to the social media platform to state the deal was “on hold”, Twitter permitted his team access to data supporting its claims that less than 5% of daily users were bots.
However, the social media platform has been reticent to allow additional access to information that could enable the data to be verified externally.
Terminating the deal could leave Musk potentially liable to pay US$1bn, as laid out in the original deal documentation.
If Twitter was proven to have materially breached the agreement, according to the arrangement the social media platform would be liable to pay the termination fee.
After reportedly waiving due diligence, Musk have to prove a material breach took place in court and that it impacted the price he should pay for the company.
Last month, Texas state attorney Ken Paxton launched an investigation into Twitter to test claims of “false reporting” the number of fake bots on its platform.
Twitter confirmed it will lay off a third of its employees in the acquisition team to manage costs amid the spat.