They quote a source familiar with the matter who claims Twitter felt, quite simply, that the numbers didn't add up. From the WSJ:
The short-messaging service chose to let the deadline for exclusivity on talks pass without coming to an agreement because "the numbers didn't add up," this person said, without specifying. It is unclear which party initiated the talks.
The original news of the discussions were first reported by Recode. If the deal would have happened, it would have most certainly been Twitter's largest to date, as SoundCloud has recently been valued as high as $700 million. The deal would have brought SoundCloud's already-established user base of 250 million to Twitter, who has been looking for ways to expand its purview.
The possible SoundCloud purchase seemed like Twitter's comeback attempt as integrating music discovery into their service after Twitter's own failed app, Twitter Music. Launched a year ago, Twitter finally axed Twitter Music in March.
Image via SoundCloud, Twitter