You are here
Home > News > Musk pulls out of Twitter deal

Musk pulls out of Twitter deal

Elon Musk, the CEO of Tesla and SpaceX, and the world’s richest person, according to Forbes, terminated his USD 44 billion deal to buy Twitter. The billionaire said that the main reason for his decision was that the social media company had breached multiple provisions of the merger agreement.

Mr. Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect (as that term is defined in the Merger Agreement),” a letter sent by Elon Musk’s legal team to Twitter’s Chief Legal Officer, Vijaya Gadde stated.

The notice also said Elon Musk was walking away because Twitter fired high-ranking executives and one-third of the talent acquisition team, breaching Twitter’s obligation to “preserve substantially intact the material components of its current business organization.”

The billionaire sent numerous letters to Twitter pushing them to release company data, so his team could calculate, on their own terms, the number of spam accounts within the social media company.

The merger agreement included a USD 1 bn break-up fee.

Twitter will fight to be bought

Twitter’s chairman, Bret Taylor, said that the board planned to pursue legal action to enforce the merger agreement.

The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.

— Bret Taylor (@btaylor) July 8, 2022

According to Reuters, disputed mergers and acquisitions that land in Delaware courts more often than not end up with the companies re-negotiating deals or the acquirer paying the target a settlement to walk away, rather than a judge ordering that a transaction be completed. That is because target companies are often keen to resolve the uncertainty around their future and move on.

“I’d say Twitter is well-positioned legally to argue that it provided him with all the necessary information and this is a pretext to looking for any excuse to get out of the deal,” Ann Lipton, associate dean for faculty research at Tulane Law School said.

Was Twitter just a bad investment?

Twitter shares were at USD 36.81 when the market closed on July 8, according to the Wall Street Journal, which is approximately 32 percent below the USD 54.20 per share Musk agreed to buy Twitter for in April.

Twitter’s shares surged after Mr Musk took a stake in the company in early April, shielding it from a deep stock market sell-off that slammed other social media platforms. However, after he agreed on April 25 to buy Twitter, the stock began to fall in a matter of days as investors speculated Musk might walk away from the deal. With its tumble after the bell on Friday, Twitter was trading at its lowest since March.

The contract calls for Musk to pay Twitter a USD 1 billion break-up if he cannot complete the deal for reasons such as the acquisition financing falling through or regulators blocking the deal. The break-up fee would not be applicable, however, if Musk terminates the deal on his own.

Warning: Invalid argument supplied for foreach() in /var/www/warsawpoint/data/www/ on line 69

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.