There is plenty of precedent for a deal renegotiation. Several companies repriced agreed acquisitions when the Covid-19 pandemic broke out in 2020 and delivered a global economic shock.
In one instance, French retailer LVMH threatened to walk away from a deal with Tiffany & Co. The US jewelry retailer agreed to lower the acquisition price by $425m to $15.8bn.
"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.
Twitter's shares surged after Musk took a stake in the company in early April, shielding it from a deep stock market sell-off that slammed other social media platforms.
But after he agreed on April 25 to buy Twitter, the stock within a matter of days began to fall as investors speculated Musk might walk away from the deal. With its tumble after the bell on Friday, Twitter was trading at its lowest since March.
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 Twitter a $1 billion break-up if he cannot 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.