The months-long Musk/Twitter saga is officially entering a new phase. After the centi-billionaire terminated his deal to purchase the company late Friday with a 13D filing, Musk claimed that Twitter was in material breach of multiple provisions of the merger agreement, most notably that the social media platform misrepresented the number of bots and fake accounts among its users. 

• Musk initially signed a legally binding agreement in April to purchase Twitter at $54.20 a share, and waived due diligence in order to speed up the deal, reports the New York Times. Furthermore, “the terms included a $1 billion breakup fee if the agreement fell apart and a clause that gives Twitter the right to sue Mr. Musk and force him to complete or pay for the deal, so long as the debt financing he has corralled remains intact.”

• And sue is exactly what Twitter plans to do. “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,” Bret Taylor, Twitter's chairman tweeted after Musk's 13D filing. “We are confident we will prevail in the Delaware Court of Chancery.”

Shakey Funding

It was evident from the get-go that Musk didn't have the $44 billion in liquid assets to purchase Twitter. Although the Tesla CEO and SpaceX founder is currently worth over $219 billion, most of that is tied up in Tesla shares. According to Reuters, Musk “initially took a $12.5-billion margin loan” against his Tesla shares to fund the purchase, but then cut it down to $6.25 billion as he brought on co-investors like Larry Ellison and Prince Alwaleed bin Talal. It was around that same time that Musk began pushing the issue of bots and fake accounts on the social media platform as a way to potentially back out of the deal.

The Verdict

While it still remains unclear what Musk’s reasoning behind this whole Twitter deal ever was, we are definitely moving into a new (and expensive) new phase. Delaware is about to have a heavyweight rumble in its chancery court over this deal.