After a long time of debate, Elon Musk on Friday finally decided to pull out of his proposed deal to acquire social media site Twitter for about US$44 billion because the company had breached multiple provisions of the merger agreement.

The company’s chairman Bret Taylor said that the board planned to then pursue legal action in an attempt to enforce the merger agreement. “The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk…,” he wrote.

Musk’s lawyer said that Twitter had failed or refused to respond to multiple requests for information on fake or spam accounts on the platform which is fundamental to the company’s business performance.

“Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement,” the filing said.

The Tesla CEO, Elon Musk also said he was canceling the deal considering the fact that Twitter fired high-ranking executives and one-third of the talent acquisition team, breaching Twitter’s obligation to “preserve substantially intact the material components of its current business organization.”

Suddenly pulling out of the much-anticipated deal to acquire Twitter will surely lead to legal action.

Disputed mergers and acquisitions that land in Delaware courts more often than not end up with the companies re-negotiating deals or the acquirer paying the target a settlement to walk away, rather than a judge ordering that a transaction be completed. That is because target companies are often keen to resolve the uncertainty around their future and move on.

Twitter is expecting court proceedings to commence in a few weeks and be resolved in a few months, according to a source familiar with the matter. There is also a number of precedent for a deal renegotiation.

Twitter, however, is hoping that court proceedings will start in a few weeks and be resolved in a few months, according to a person familiar with the matter.

An instance where such has happened in the past is with French retailer LVMH which threatened to cancel a deal with Tiffany & Co. a US jewelry retailer before a newer deal was struck that saw the acquisition price drop by US$425 million to US$15.8 billion.

“I’d say Twitter is well-positioned legally to argue that it provided him with all the necessary information and this is a pretext to looking for any excuse to get out of the deal,” said Ann Lipton, associate dean for faculty research at Tulane Law School.

Shares of Twitter were down 6% at $34.58 in extended trading. That is 36% below the $54.20 per share Musk agreed to buy Twitter for in April. However, upon acquiring a stake in the company back in April, the company saw an increase in its share but after announcing his decision to acquire the company by April 25th, the Twitter stock began to plummet as investors speculated Musk might walk away from the deal.

The announcement is another twist in a will-he-won’t-he saga after Musk clinched the deal to purchase Twitter in April but then put the buyout on hold until the social media company proved that spam bots account for less than 5% of its total users.

The contract calls for Musk to pay about US$1 billion in break-ups if he can’t complete the deal for reasons such as the acquisition financing falling through or regulators blocking the deal.

The break-up fee would not be applicable, however, if Musk terminates the deal on his own.

Some employees expressed disbelief and exhaustion on Friday, publicly posting memes on Twitter, such as of a rollercoaster ride and a baby screaming into a phone, in apparent commentary on the breakup. Employees have worried about what the deal will mean for their jobs, pay, and ability to work remotely, and many have expressed skepticism about Musk’s plans to loosen content moderation.

The forthcoming battle between Musk and the social media company puts uncertainty over the company’s future and its stock price during a time when worries about rising interest rates and a potential recession have hammered Wall Street.

Other online advertising firms including Alphabet, Meta, Snap, and Pinterest have seen their stocks dropping by 45% on average in 2022 alone while Twitter’s stock has declined by just 15% in that time.

Daniel Ives, an analyst at Wedbush, said Musk’s filing was bad news for Twitter.

“This is a disaster scenario for Twitter and its Board as now the company will battle Musk in an elongated court battle to recoup the deal and/or the breakup fee of $1 billion at a minimum,” he wrote in a note to clients.