Twitter responded to Elon Musk on Monday, accusing him of “knowingly” violating an agreement to buy the social media company, just days after the CEO of Tesla Inc tried to back out of the $44 billion deal.
Twitter stated in a letter to Musk dated Sunday and filed with regulators Monday that it had not breached its obligations under the merger agreement, as Musk indicated Friday in his decision to terminate the agreement.
“Twitter has not experienced and is unlikely to experience a material adverse effect from the business,” it added.
The company had planned to sue Musk to force him to complete the transaction, a threat Musk dismissed on Monday. According to people familiar with the situation, Twitter plans to file a lawsuit in Delaware earlier this week.
Twitter also indicated in the letter that the merger agreement was still in effect and that it would take steps to complete the transaction.
Shares of Twitter closed 11.3% lower on Monday at $32.65 a share, a 40% discount to Musk’s $54.20 offer and the biggest daily percentage drop in more than 14 months. In extended trading, they gained around 1%.
“Twitter’s board must consider the potential harm to its employee and shareholder base from any additional internal data exposed in the litigation,” said Mark Zgutowicz, an analyst at Benchmark.
According to Francis Pileggi, a corporate litigator for Lewis Brisbois in Delaware, if Musk defends himself against Twitter’s lawsuit alleging the company misrepresented the number of fake accounts, it could put bots front and center in the litigation, AFP reports.
“I’d be surprised if you can’t get that information,” Pileggi said.
Pileggi believes that if the number of fake accounts exceeds Twitter’s estimate of 5%, it could lead to price negotiations for the social media platform.
According to legal experts, the 16-year-old social media company has a strong legal case against Musk, but it can choose to renegotiate or settle over a lengthy court battle.
“We believe that Elon Musk’s intention to terminate the merger is based on the recent market sell-off and not Twitter’s ‘failure’ to comply with his requests,” Jefferies analyst Brent Thill wrote in a note.
“We wouldn’t be surprised if shares find a floor at $23.5 absent a deal.”
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