Elon Musk officially moves to back out of Twitter deal, company prepares to sue

UPDATE: July 11, 2022: Elon Musk officially moved to back out of his $44 billion deal for Twitter Friday afternoon via a court filing. In a tweet, Twitter chairman and Salesforce Co-CEO Bret Taylor said the company’s board is committed to closing the transaction at the agreed-upon price and would pursue legal action against the Tesla and SpaceX founder in the Delaware Court of Chancery. Musk late Sunday night responded to Twitter’s intentions to sue with a mocking tweet referencing his gripes over the company’s disclosure of bot activity. 

Elon Musk could be angling for a way out of his current agreement to acquire Twitter for $44 billion due to concerns related to bot activity, The Washington Post reported Thursday.

The SpaceX and Tesla founder’s camp is prepared to take “drastic action” after deciding it couldn’t verify internal figures the platform shared around spam accounts, according to the paper, though what that would be isn’t yet clear. The team has put key funding talks on ice amid the trepidation, according to the Post’s sources. Twitter, which initially resisted the takeover plans, has been adamant that they will happen.

Meanwhile, Twitter’s business has continued to lag. The company has tried to diversify revenue beyond advertising through bets in areas like social commerce, but those are early experiments unlikely to right the ship short-term. Musk’s maneuvers have also hurt internal morale, while cutbacks are taking their toll. The company froze hiring in May and recently laid off 30% of its talent acquisition team, The Wall Street Journal reported.

One pathway forward could be Musk pushing to renegotiate the deal price, a potentially appealing option for him since tech stocks have fallen into a rout since the spring. Pulling out of the arrangement full-stop would be challenging and almost certainly set up some sort of legal battle for Musk, who hastily signed a deal in April. At the very least, the executive would be facing a $1 billion breakup fee.

Musk, one of Twitter’s most-followed personalities, has long carped about bots. In May, he said the acquisition was “on hold” to reassess whether Twitter’s claims that fewer than 5% of its accounts are spam were accurate. Twitter in June opened a “fire hose” of data to the entrepreneur, but that hasn’t proved satisfactory.

Twitter has made its internal assessments of bot and spam activity public information for years. Musk, in announcing the acquisition in April, also said his goals included “defeating the spam bots” and “authenticating all humans” on the service. Some commentators have wondered why those issues have become dealbreakers for Musk if they were one of his main reasons for taking Twitter private in the first place.

For more on how Twitter’s strategy to right its ship has evolved in the last year, see below.