Elon Musk Twitter Deal on Hold: Is a Legal Battle on the Cards?
Elon Musk Twitter Deal on Hold
On Friday, Elon Musk, CEO of Tesla, announced that he was terminating his $44 billion offer to buy Twitter. Let us look at the reason and what follows for investors.
What was the offer by Elon Musk for Twitter?
- In April, Elon Musk made an offer to buy Twitter for $44 billion. He held 9% in the company back then.
- As per the filing, Musk offered $54.20 per share, which was a 38% premium to Twitter's 1 April close price.
- He was offered a position on the Twitter board. However, he abandoned the plan to join the board. Taking the board seat would have prevented him from a possible takeover of the company.
- The deal was approved by the Twitter board. In the last couple of months, Elon Musk had asked for data from the company to go ahead with the deal.
- Twitter's shares surged after Musk took a stake in the company in April. However, after the news of him buying Twitter in the last week of April was confirmed, the stock prices started to come down. Most investors speculated that Musk will walk away from the deal.
Why did Elon Musk call off the deal?
- The deal will not happen because the social media company has breached multiple provisions of the merger agreement.
- Musk's legal team has released a statement, per them, Twitter had failed or refused to respond to multiple requests for information on fake or spam accounts on the platform which is fundamental to the company's business performance.
- They added that Twitter appears to have made false and misleading representations upon which Mr Musk relied when entering into the Merger Agreement.
- Musk said that he is walking away from the deal because Twitter fired one-third of the talent acquisition team and high-ranking executives which is a breach to "preserve substantially intact the material components of its current business organization".
What penalty Elon Musk has to pay for calling off the deal?
As per the agreement, Musk will have to pay Twitter a $1 billion break-up if he is unable to complete the deal for reasons such as a regulator blocking the deal, or he is not able to finance the deal. However, if Musk terminates the deal on his own (which is the case here), the break-up fee won't be applicable.
Elon Musk Twitter Deal on Hold: Legal Battle on the Cards?
Yes. Twitter's chairman, Bret Taylor, said that the board planned to pursue legal action to enforce the merger agreement.
Shares of Twitter closed at $36.81, down 5%. It is 31% below the offer price of Musk.
Did Musk cancel Twitter deal?
Yes, Elon Musk officially terminated a $44 Bn deal to buy Twitter on Friday last week.
Why did Elon Musk terminate the Twitter deal?
In the filing to Twitter's chief legal officer, Musk's team said he was “terminating the Merger Agreement” between the two sides due to a “material breach” of the deal and “false and misleading representations” Twitter made prior to the agreement.
Can Twitter Sue Musk?
Musk had signed the contract which mentioned that Twitter has the right to sue for “specific performance”—which means, they can go to court to compel Musk to complete the deal.