In a letter filed on behalf of Musk and his funding companions at Morgan Stanley, Musk is searching for to cancel the acquisition as a result of a ‘materials breach of a number of provisions’ of the unique merger settlement.

As per the submitting:

‘[Twitter] seems to have made false and deceptive representations upon which Mr. Musk relied when getting into into the Merger Settlement, and is more likely to endure a Firm Materials Antagonistic Impact (as that time period is outlined within the Merger Settlement).”

Musk’s group says that, regardless of repeated requests for qualifying info, Twitter had failed to supply them with the info required to make an correct and true evaluation of the variety of pretend accounts on its platform.

“Whereas Part 6.4 of the Merger Settlement requires Twitter to supply Mr. Musk and his advisors all information and data that Mr. Musk requests “for any cheap enterprise objective associated to the consummation of the transaction,” Twitter has not complied with its contractual obligations.”

Musk’s group says that it has been searching for extra info from Twitter for almost two months, with Twitter solely offering restricted entry to the required information, in violation of the phrases.

“Typically Twitter has ignored Mr. Musk’s requests, generally it has rejected them for causes that look like unjustified, and generally it has claimed to conform whereas giving Mr. Musk incomplete or unusable info.”

In whole, Musk’s group says that Twitter has failed to supply them with info on:

• Data associated to Twitter’s course of for auditing the inclusion of spam and pretend accounts in mDAU
• Data associated to Twitter’s course of for figuring out and suspending spam and pretend accounts
• Every day measures of mDAU for the previous eight (8) quarters
• Board supplies associated to Twitter’s mDAU calculations
• Supplies associated to Twitter’s monetary situation

As a result of Twitter has didn’t adjust to these requests inside an affordable time interval, that, Musk’s group says, is a violation of the deal’s phrases, and is due to this fact purpose sufficient to cancel the settlement.

The letter additionally notes that Musk’s group continues to be unconvinced of Twitter’s metrics, with its personal evaluation of Twitter’s expanded utilization information, which it offered final month, exhibiting that pretend accounts are extra prevalent within the app than Twitter claims:

“Preliminary evaluation by Mr. Musk’s advisors of the data offered by Twitter up to now causes Mr. Musk to strongly consider that the proportion of false and spam accounts included within the reported mDAU rely is wildly increased than 5%.”

Musk’s group additionally says that, primarily based on its discussions with firm execs, its understanding is that Twitter consists of accounts which were suspended inside its lively consumer metrics, which it says would see Twitter nonetheless together with recognized pretend and spam accounts inside its publicly reported figures. Musk’s group additionally says Twitter’s course of for figuring out the proportion of pretend accounts ‘seems to be arbitrary and advert hoc’, additional clouding their metrics.

Based mostly on these ongoing questions, and Twitter’s failure to supply ample justifications for such, Musk and Co. wish to pull out, which is able to now put the onus on the SEC and/or the courts to resolve whether or not the reasoning right here is justified, and the way it strikes ahead, or not, with the merger.

Which could possibly be a catastrophe for Twitter, which has already minimize govt jobs and shifted its complete enterprise strategy, in preparation for a pending Musk takeover.

Certainly, this week, studies instructed that Twitter CEO Parag Agrawal is ‘prepared to go to conflict’ with the intention to make Elon Musk observe by along with his takeover bid, even when Musk appears to be like to again out of the method. Agrawal would personally be in for an enormous payday if the Musk deal had been to undergo – however greater than that, the deal falling aside now would elevate important questions over Twitter’s future, and its capability, as a enterprise, to grow to be a extra viable, priceless proposition.

The overriding consensus to this point has been that Musk will ultimately should undergo along with his Twitter takeover push both means, as a result of Musk waived numerous due diligence measures in his preliminary supply, with the intention to expedite the transaction,

However in at present’s letter, Musk’s group has additionally offered a be aware of readability on this level:

“Regardless of public hypothesis on this level, Mr. Musk didn’t waive his proper to evaluate Twitter’s information and data just because he selected to not search this information and data earlier than getting into into the Merger Settlement. In actual fact, he negotiated entry and data rights throughout the Merger Settlement exactly in order that he might evaluate information and data that’s necessary to Twitter’s enterprise earlier than financing and finishing the transaction.”

It appears, then, {that a} stand-off is coming, with Musk now making the transfer that many had anticipated, which is able to power Twitter to reply and supply an in depth rationalization of such to the SEC.

Twitter board Chairman Bret Taylor was fast to reply to the information:

Will Musk be capable to get out of the deal, or will Twitter certainly be capable to power Musk to pay up, primarily based on the phrases of the settlement?

It appears to be like like issues are about to get actually ugly, which may solely be unhealthy for Twitter as a enterprise.