The announcement is the latest twist in a long-running saga after the world’s richest person decided to buy Twitter in April.
Mr Musk said he had backed out because Twitter failed to provide enough information on the number of spam and fake accounts.Twitter says it plans to pursue legal action to enforce the agreement.
Twitter Chairman Bret Taylor tweeted, “The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk,”, setting up a potentially long and protracted legal battle between the two sides.
The original merger agreement includes a $1bn (£830m) break-up fee.
Row over fake accounts
According to the BBC, in May this year, Mr Musk said the deal was “temporarily on hold” as he was awaiting data on the number of fake and spam accounts on Twitter.
The billionaire businessman had asked for evidence to back the company’s assertion that spam and bot accounts make up less than 5% of its total users.
In a letter filed with the US Securities and Exchange Commision, Mr Musk’s lawyer said Twitter had 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,” the letter reads.
Spam accounts are designed to spread information to large numbers of people and manipulate the way they interact with the platform. On Thursday, Twitter said it removed around 1 million such accounts each day.
Mr Musk believes that spam or bot accounts could account for 20% or more of Twitter users.
Shares in Twitter fell by 7% in extended trading after the announcement.
One legal expert said he expected Twitter to file a lawsuit in Delaware, the US state that has jurisdiction over the deal, as soon as Monday.
“They will likely be asking for a declaratory judgment that they are not in violation of the contract. Also, they will ask for an order from the court that Musk specifically perform his obligations under the agreement,” said Brian Quinn, an associate professor at Boston College law school.
Under the terms of the agreement the company can ask a judge for “specific performance”, which would compel Musk to buy the company for the $54.20 a share he agreed to in April. Alternatively, the company can also seek a $1bn break fee from Musk for walking away from the deal in contravention of the agreement.