The billionaire claimed that he was terminating the deal based on concerns over the number of the spam accounts on the platform, though analysts have questioned that excuse.
Tesla's share price is down well over 30% from its peak in April, making it harder for Musk to finance the deal. Meanwhile the CEO has also had problems defining how he would effectively moderate the platform.
In response to the news, Twitter's chair Bret Taylor has announced that the firm intends to "pursue legal action to enforce the merger agreement". It has since been reported that Twitter had assembled a legal team to sue Musk.
Twitter investors sue Elon Musk for stock 'manipulation' during takeover bid
Despite Musk's intention to pull out of the deal, the firm can ask a judge for "specific performance", compelling Musk to either buy the company for $54.20 a share, as he agreed earlier this year, or attempt to increase the $1bn break fee from the contract.
Twitter has since ordered staff to not discuss Musk's aborted takeover, as it prepares itself for the legal fight.
Shares in Twitter have fallen about 8% since the news, down to close to $34 a share.
