A semi-draft was leaked and she decided not to finish it.
That's basically what happened.
You can go on to her website where she explains why she won't finish it.
From SM's website.
As some of you may have heard, my partial draft of Midnight Sun was illegally posted on the Internet and has since been virally distributed without my knowledge or permission or the knowledge or permission of my publisher.
I did not want my readers to experience Midnight Sun before it was completed, edited and published. I think it is important for everybody to understand that what happened was a huge violation of my rights as an author, not to mention me as a human being. As the author of the Twilight Saga, I control the copyright and it is up to the owner of the copyright to decide when the books should be made public; this is the same for musicians and filmmakers. Just because someone buys a book or movie or song, or gets a download off the Internet, doesn't mean that they own the right to reproduce and distribute it. Unfortunately, with the Internet, it is easy for people to obtain and share items that do not legally belong to them. No matter how this is done, it is still dishonest. This has been a very upsetting experience for me, but I hope it will at least leave my fans with a better understanding of copyright and the importance of artistic control.
So where does this leave Midnight Sun? My first feeling was that there was no way to continue. Writing isn't like math; in math, two plus two always equals four no matter what your mood is like. With writing, the way you feel changes everything. If I tried to write Midnight Sun now, in my current frame of mind, James would probably win and all the Cullens would die, which wouldn't dovetail too well with the original story. In any case, I feel too sad about what has happened to continue working on Midnight Sun, and so it is on hold indefinitely.
Read all that she has to say here.