According to Twitter’s chairman Bret Taylor, the board intends to enforce the merger deal via legal means. Because of several infringements on his agreement with Tesla CEO and wealthiest man in the world Elon Musk, he terminated his USD 44 billion contracts to purchase Twitter on Friday.
According to the tweet, “The Twitter Board is committed to completing the deal with Mr. Musk… at the price and conditions agreed upon.” As Musk’s attorneys said in a court filing, the social media network Twitter had failed or refused to answer several requests for information on fraudulent or spam accounts, which are critical to the firm running smoothly.
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Multiple terms of the Agreement were breached by Twitter, which Musk relied on when he signed the Merger Agreement, according to a filing by the company.
Tesla CEO Elon Musk also said that he was resigning from Twitter because the company had violated its responsibility to “maintain substantially intact the key components of its present business organization.”
Renegotiation of a contract is not without precedent. When the COVID-19 pandemic erupted in 2020, a worldwide economic shock, some corporations re-priced acquisitions they had already committed to.
BREAKING: Elon Musk has terminated his deal to buy Twitter, which is shocking because I didn’t think he knew how to pull out of anything.
— Jo 🌻 (@JoJoFromJerz) July 8, 2022
While working with Tiffany and Co., France’s largest department store chain LVMH threatened to walk away from the agreement. USD 425 million has been shaved off of the transaction price, bringing the total to USD 15.8 billion from USD 15.4 billion.
Tulane Law School assistant dean for faculty research Ann Lipton: “I’d think Twitter is well-positioned legally to claim that it supplied him with all the essential information and this is a pretext to searching for any reason to get out of the arrangement.”
Shares of Twitter were trading at USD 34.58 in extended trading, a 6% decrease from their previous close. In other words, it’s 36% less than the USD 54.20 per share Musk agreed to pay for Twitter in April.
Twitter’s price rose when Musk bought a stake in the firm in early April, protecting it from a steep drop in the stock market that hit other social media companies hard. Following his agreement on April 25, Musk’s stock started to plummet within a number of days as investors feared that Musk might abandon the transaction. On Friday, Twitter’s share price fell to its lowest level since March.
You might think that Elon Musk backing out of a $44 bIllini Twitter deal is bad, but it’s nothing compared to when he backed out of his $6 billion promise to the UN to help solve world hunger.
— Read Wobblies and Zapatistas (@JoshuaPotash) July 8, 2022
It is the latest twist in a tale that began in April when Tesla CEO Elon Musk agreed to acquire Twitter but put the sale on hold until the social media firm could verify that spambots make up fewer than 5% of its total users.
As part of the agreement, Musk agrees to make a USD 1 billion break-up payment to Twitter should Musk be unable to complete the sale due to things like failed acquisition finance or regulatory blockage. However, if Musk quits the agreement on his own, the break-up charge would not be relevant.
Digital And Woes
During a time of increasing interest rates and the fear of a recession, the abandoning of the transaction by Tesla CEO Elon Musk and Twitter’s vow to fight to finish it puts a cloud over the company’s future and stock price.
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Twitter’s stock has fallen barely 15 percent since the transaction with Elon Musk in recent months, compared to a 45 percent drop for the likes of Alphabet’s Meta Platforms, Snap’s Snap, and Pinterest’s Pinterest. Wedbush analyst Daniel Ives claimed that the filing by Tesla CEO Elon Musk was terrible news for Twitter.
When it comes to Twitter and its Board, “this is a catastrophe scenario since now the business will face up against Musk in an extended legal fight to get back their contract and/or the breakup fee of at least USD 1 billion at a minimum,” he said in an email to clients.
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