Tesla CEO Elon Musk moved Friday afternoon to terminate his $44 billion deal to buy Twitter - the latest twist in a whirlwind process in which the leading billionaire became the company's biggest shareholder, turned down a board seat, agreed to buy the social media platform and then started raising doubts about going through with the deal. 

 

The next chapter in the saga is almost certain to be a court battle, reported CNN.

 

A lawyer representing Musk claimed in a letter to Twitter's top lawyer that he is ending the deal because Twitter is "in material breach of multiple provisions" of the original agreement, which was signed in April, according to a regulatory filing Friday evening.

 

In the letter, disclosed in a Securities and Exchange Commission filing, Skadden Arps attorney Mike Ringler said that “Twitter has not complied with its contractual obligations.”

 

Ringler claimed that Twitter did not provide Musk with relevant business information he requested, as Ringler said the contract would require. Musk has previously said he wanted to assess Twitter’s claims that about 5% of its monetizable daily active users (mDAUs) are spam accounts.

 

“Twitter has failed or refused to provide this information,” Ringler claimed. “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.”

 

Musk has for weeks expressed concerns, without any apparent evidence, that there are a greater number of bots and spam accounts on the platform than Twitter has said publicly. 

 

However, Twitter’s board chair Bret Taylor said the company is still committed to closing the deal at the agreed-upon price and plans to pursue legal action to enforce the agreement, reported CNBC.

 

We are confident we will prevail in the Delaware Court of Chancery,” Taylor wrote.

 

Twitter shares were down about 6% after hours on Friday.

 

Twitter has reason to seek to hold Musk to his original terms. The stock has fallen considerably since the board announced it had accepted his offer to buy the company at $54.20 per share. 

 

On the day of that announcement, the stock ended the trading day at $51.70 per share. Twitter shares sat at $36.81 as of Friday’s market close.

 

Under the terms of the agreement, Musk agreed to pay $1 billion if he backs out. But as Twitter’s board chair indicated they would do, the company can seek to hold Musk to his original deal by suing him for walking away if they dispute that his reasoning should let him out of the contract.

 

Twitter has reason to seek to hold Musk to his original terms. The stock has fallen considerably since the board announced it had accepted his offer to buy the company at $54.20 per share. On the day of that announcement, the stock ended the trading day at $51.70 per share. Twitter shares sat at $36.81 as of Friday’s market close.

 

Musk is apparently paying attention to the stock price, too, according to the letter, “and is considering whether the company’s declining business prospects and financial outlook constitute a Company Material Adverse Effect giving Mr. Musk a separate and distinct basis for terminating the Merger Agreement.”

 

Analysts have speculated that the concerns may be an attempt to create a pretext to get out of a deal he may now see as overpriced, after Twitter shares and the broader tech market have declined in recent weeks. Tesla (TSLA) stock, which Musk was planning to rely on in part to finance the deal, has also declined sharply since he agreed to the deal.

 

"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," Twitter board chair Bret Taylor said in a tweet Friday, echoing earlier statements by the company that it planned to follow through with the deal. 

 

Last month, Musk directly threatened to walk away from the deal, accusing Twitter of breaching the merger agreement by not providing the data he says he needs to evaluate the number of spam and fake accounts on the platform. In response, Twitter agreed to hand over its "firehose" stream of tweets.