Here’s why Elon Musk backed out of $44 billion deal to buy Twitter

Elon Musk, the chief executive officer of Tesla and the world's richest person, said on Friday he was terminating his $44 billion deal to buy Twitter.

After Elon Musk disclosed his intention to exit the deal, Twitter Board Chairman Bret Taylor responded with a threat to take him to court.

“We are committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plan to pursue legal action to enforce the merger agreement,” Twitter said in a statement. “We are confident we will prevail in the Delaware Court of Chancery.”

Here's what led Elon Musk back out Twitter deal:

Musk has accused the social media giant of "misleading" statements about the number of fake accounts.

Twitter has made “misleading representations" over the number of spam bots on the social network, and hasn’t “complied with its contractual obligations" to provide information about how to assess how prevalent the bots are, Musk’s representatives said Friday in a letter to Twitter as part of a regulatory filing.

The Tesla CEO had earlier threatened to walk away from the deal if the company can't show that less than 5% of its daily active users are automated spam accounts. According to the Washington Post, Musk has been unable to pin down the percentage of Twitter accounts that are not genuine, despite being given access to internal data. Meanwhile, Twitter had said that it removes 1 million spam accounts each day and denied the claim saying, bots are less than 5% of the total users.

Musk also argued that Twitter has failed to operate its normal course of business. The San Francisco-based company instituted a hiring freeze, fired senior leaders and saw other major departures. “The company has not received parent’s consent for changes in the conduct of its business, including for the specific changes listed above," Musk said in the letter, calling it a “material breach" of the merger agreement. 

Back in June, Musk had openly accused the microblogging website of breaching the merger agreement and threatened to walk away and call off the acquisition of the social media company for not providing the data he has requested on spam and fake accounts. Against this backdrop, Twitter's CEO Parag Agrawal last month stood by his company's longtime spam metric. "Twitter has and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement," the company said in a statement in June.

The entire deal has been a frenzied and untraditional affair, largely played out on Twitter’s own social network. Musk went from being merely a prolific user to revealing a significant stake in Twitter, and then launching an unsolicited takeover offer -- without detailed financing plans -- within a matter of weeks. The agreement came together at breakneck speed in part because Musk waived the chance to look at Twitter’s finances beyond what was publicly available.

Musk’s termination letter torpedoed Twitter stock further and threw the company’s future into heightened disarray after months of chaotic ups and downs, mainly based on Musk’s shifting public statements about the transaction. Employees on Friday were told to refrain from posting on Twitter or on Slack about the deal, as it is now considered an ongoing legal matter, according to a person familiar with the situation.

(With inputs from agencies)