Elon Musk files to cancel the Twitter acquisition

Elon Musk wants to pull out of the deal to buy Twitter, his lawyers told the company in a letter Friday.

Musk's lawyers wrote that Twitter had made "false and misleading representations," chiefly around the issue of bot accounts, which Musk has repeatedly raised in the weeks since signing a binding agreement to buy Twitter. They argue that Twitter's representations in SEC filings over the years about fake or spam accounts were "materially misleading," and also complained that Twitter had failed to provide financial planning documents including a 2022 budget.

The letter also details limitations Twitter placed on a "firehose" of data it provided to allow Musk's team to make its own evaluation of the proportion of fake or spam accounts on the service. Despite those limitations, that team concluded that fake or spam accounts might exceed the 5% of monetizable daily active users Twitter has previously estimated are bots.

"Preliminary analysis by Mr. Musk’s advisors of the information provided by Twitter to date causes Mr. Musk to strongly believe that the proportion of false and spam accounts included in the reported mDAU count is wildly higher than 5%," Musk's lawyers wrote.

Musk's reversal is not unexpected. He said in May he was putting his acquisition "on hold" while his team investigated the bot question. On Thursday, The Washington Post reported that Musk's deal to buy Twitter was in jeopardy, as his team was still struggling to determine the prevalence of bots on the platform. Musk and his team also reportedly stopped taking part in talks about funding the deal, and one source told the Post that “Twitter has not been cooperative.”

Twitter has strong protections against Musk walking away from the deal, given that he signed a binding agreement to go through with the acquisition. Besides a $1 billion termination fee, the agreement includes a clause giving Twitter the right to seek "specific performance," or relief that involves a court compelling Musk to carry out the deal.

The company, for its part, isn't having it. "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," Twitter board chairman Bret Taylor said in a tweet. "We are confident we will prevail in the Delaware Court of Chancery." The legal battle there will no doubt be long and messy.

This is a developing story and will be updated.