Responding to Musk's attempted withdrawal, Twitter chairman Bret Taylor signalled the company would go to court in an effort to force him to go through with the deal.
"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," Taylor wrote in a social media post, retweeted by Twitter CEO Parag Agrawal.
"We are confident we will prevail in the Delaware Court of Chancery."
Twitter could have pushed for a US$1 billion breakup fee Musk agreed to pay under the circumstances. Instead, it looks ready to fight over the deal, which the company's board has approved and Agrawal has insisted he wants to consummate.
On Friday (Saturday NZ time), shares of Twitter fell 5 per cent to US$36.81, well below the US $54.20 that Musk had offered to pay. Shares of Tesla, meanwhile, climbed 2.5 per cent to US$752.29.
In their letter, addressed to Twitter's Chief Legal Officer Vijaya Gadde and revealed by a filing with the US Securities and Exchange Commission, Musk's lawyers argued the company had breached its obligation to provide him with information requested "for any reasonable business purpose related to the consummation of the transaction".
"Twitter has not complied with its contractual obligations. For nearly two months, Mr Musk has sought the data and information necessary to 'make an independent assessment of the prevalence of fake or spam accounts on Twitter's platform'. This information is fundamental to Twitter's business and financial performance and is necessary to consummate the transaction," lawyer Mike Ringler wrote.
"Twitter has failed or refused to provide this information. Sometimes Twitter has ignored Mr Musk's requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr Musk incomplete or unusable information."
He said Musk had made "numerous follow-up requests" aimed at "filling the gaps in the complete information Twitter provided".
"In short, Twitter has not provided information that Mr Musk has requested for nearly two months notwithstanding his repeated, detailed clarifications intended to simplify Twitter's identification, collection and disclosure of the most relevant information sought.
"As Twitter has been on notice of its breach (of the merger agreement) since at least June 6, any cure period offered to Twitter under the agreement has now lapsed. Accordingly, Mr Musk hereby exercises (his) right to terminate the agreement and abandon the transaction contemplated thereby."
The unravelling of the deal is just the latest twist in a saga between the world's richest man and one of the most influential social media platforms. Much of the drama has played out on Twitter, with Musk — who has more than 95 million followers — lamenting that the company was failing to live up to its potential as a platform for free speech.
In a letter to the Securities and Exchange Commission, Musk said Twitter has "not complied with its contractual obligations" surrounding the deal, namely giving Musk enough information to "make an independent assessment of the prevalence of fake or spam accounts on Twitter's platform".
Musk's flirtation with buying Twitter appeared to begin in late March. That's when Musk said he contacted members of its board — including co-founder Jack Dorsey — and told them he was buying up shares of the company and interested in either joining the board, taking Twitter private or starting a competitor. Then, on April 4, he revealed in a regulatory filing that he had become the company's largest shareholder after acquiring a 9 per cent stake worth about US$3 billion.
At first, Twitter offered Musk a seat on its board. But six days later, Twitter CEO Parag Agrawal tweeted that Musk will not be joining the board after all. His bid to buy the company came together quickly after that.
Musk had agreed to buy Twitter for US$54.20 per share, inserting a "420" marijuana reference into his offer price. He sold roughly US$8.5 billion worth of shares in Tesla to help fund the purchase, then strengthened his commitments of more than US$7 billion from a diverse group of investors including Silicon Valley heavy hitters like Oracle co-founder Larry Ellison.
Inside Twitter, Musk's offer was met with confusion and falling morale, especially after Musk publicly criticised one of Twitter's top lawyers involved in content-moderation decisions.
As Twitter executives prepared for the deal to move forward, the company instituted a hiring freeze, halted discretionary spending and fired two top managers. The San Francisco company has also been laying off staff, most recently part of its talent acquisition team.
