Elon Musk threatens to terminate $44bn Twitter deal due to a material breach of contract.

Elon Musk has accused Twitter of enacting a "material breach" of his $44 billion purchase agreement, threatening to terminate the deal. If Twitter does not comply with his request for information on the platform's bot accounts, the Tesla CEO has threatened to pull the plug on the agreement.

As part of a simmering disagreement about the number of spam and fraudulent accounts that populate the site, Musk's attorneys have written to Twitter accusing the company of refusing to share sufficient information about the number of false users on the platform. The letter, presented to Twitter and filed with the Securities and Exchange Commission (SEC), accelerated Musk's campaign to terminate the acquisition. Musk has hinted several times since striking a deal to buy Twitter in April that he may seek to cancel the deal. Monday's letter contained his most unequivocal statements yet about his wish to leave and a legal basis for doing so.

Twitter ($TWTR) and Tesla ($TSLA) shares reaction to the news

Twitter shares traded at $38.13, down by 5.5% after the news. The price is trading at a substantial discount to Musk's offer of $54.20 per share, indicating that investors did not anticipate the deal to close at the agreed price. On Monday, Twitter's stock fell 1.5% to close at $39.56 and is set to trade at $39.17 pre-market today.

Tesla shares seem unaffected by the news as the stock price was up 1.60% at the close of trading yesterday, trading at $714.84 per share. Tesla shares are expected to trade at $708.49 at pre-market today, which is -0.89% from the close of the market yesterday.

Twitter's reaction to the letter

In response, Twitter CEO Parag Agrawal noted that the most complex spam campaigns combined humans and automation. He did not believe the computations could be performed outside of Twitter because they required both public and private information, which Twitter does not provide.

In his letter, Musk stated that he needed the data to perform his research on Twitter users and that he did not trust the company's "lax testing methodologies."

Conclusion

No one knows how the "Twitter breach" saga will end. It is, however, certain that Musk's stands affect Twitter stocks. Luckily, Tesla's shareholders have nothing to worry about as their stocks are independent of Twitter's. Only time will tell how high or low Twitter stocks will rise or fall.

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