Britta Pedersen/Getty Images; Twitter; Rachel Mendelson/Insider
- Elon Musk’s lawyers filed a letter to the SEC that he would not go forward with his deal to buy Twitter.
- It’s probably not going to be that easy, legal experts previously told Insider.
- Tech analyst Daniel Ives wrote Musk’s abandonment is a “disaster scenario” for Twitter.
With Elon Musk announcing Friday he will attempt to walk away from his deal with Twitter, a “disaster scenario” is coming for the social media company, according to tech analyst Daniel Ives.
“Now, the company will battle Musk in an elongated court battle to recoup the deal and/or the breakup fee of $1 billion at a minimum,” he wrote in a Friday research note.
Elon Musk isn’t exactly known for shying away from a fight – or a tough legal battle. In the initial agreement, the billionaire entrepreneur waived his right to “due diligence,” which allows dealmakers a comprehensive inspection of the business.
Nevertheless, Musk’s lawyers have said that doesn’t mean he relinquished his right to examine information about the company, Insider previously reported. The termination letter, filed with the SEC late Friday, said Twitter had not given Musk enough information about spam bots on the platform.
“For nearly two months, Mr. Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform’… This information is fundamental to Twitter’s business and financial performance and is necessary to consummate the transactions contemplated by the Merger Agreement,” the SEC notification said.
Musk has made much of the spam bot issue publicly as well.
Brian Quinn, associate professor at the Boston College Law School, told Insider that Musk has a “very hard legal claim to win,” as far as what it would take for him to be able to walk away from the plan to buy the company.
Ives added the legal action is not something Wall Street is thrilled about. “The Street is wary of the looming court battle ahead between Musk and the Twitter Board,” he wrote.
Twitter said Friday it would take Musk to court to force him to go through with the deal. The company’s stock dropped about 5.4% in after-hours trading.
“This soap opera has seen many twists and turns and now ultimately Twitter (and its Board) goes back to the drawing board… now it ends (for now) in a Twilight Zone ending,” Ives noted.