Tesla CEO and the world’s richest man, Elon Musk, said on Friday that he was terminating his $44 billion deal to buy Twitter because the social media company violated several provisions of the merger agreement. Twitter chairman Brett Taylor said on the micro-blogging platform that the board plans to take legal action to enforce the merger agreement. “The Twitter Board is committed to closing the transaction on the price and terms agreed with Mr. Musk…,” he wrote. In a filing, Musk’s lawyers said Twitter 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.
“Twitter appears to be in material breach of several provisions of that agreement by making false and misleading representations to the extent to which Mr. Musk entered into the merger agreement,” the filing said. Musk also said he was walking away because Twitter fired high-ranking executives and a third of the talent acquisition team, citing Twitter’s obligation to “substantially preserve the physical components of its current business organization”. Violated.
Legal battle ahead?
Musk’s decision is likely to lead to a protracted legal battle between the billionaire and the 16-year-old San Francisco-based company.
Disputed mergers and acquisitions, which land in Delaware courts, are ordered by a judge rather than renegotiate the companies’ deals or pay the target to the acquirer that the transaction is complete. This is because target companies are often eager to move forward and resolve uncertainty about their future. Twitter, however, expects court proceedings to begin in a few weeks and be resolved in a few months, according to a person familiar with the matter.
There are plenty of precedents for negotiating a deal. When the COVID-19 pandemic broke out in 2020 and caused a global economic shock, several companies agreed to take over. In one instance, French retailer LVMH threatened to walk away from a deal with Tiffany & Co. The US jewelery retailer agreed to reduce the acquisition price from $425 million to $15.8 billion. Ann Lipton, Associate Dean of Faculty Research, said: “I would say that Twitter is legally well positioned to argue that it has provided it with all the information it needs and that it is an excuse to seek an excuse to exit the deal.” Excuse is.” Tulane Law School. Twitter shares were down 6% at $34.58 in extended trading. That’s 36% less than the $54.20 per share Musk agreed to buy Twitter in April.
Twitter shares jumped after Musk took a stake in the company in early April, which saved it from a deep stock market sell-off that slammed other social media platforms. But after agreeing to buy Twitter on April 25, the stock began to fall within days as investors speculated that Musk might walk away from the deal. After the bell on Friday, Twitter was trading at its lowest level since March.
The announcement is another twist in the will-not-that saga after Musk struck a deal to buy Twitter in April, but the purchase is put on hold until the social media company can prove it’s spam. The bot account has less than 5%. its total users.
The contract asked Musk to pay Twitter a break-up of $1 billion if it cannot complete the deal for reasons such as falling acquisition financing or regulators blocking the deal. The break-up fee will not apply, however, if Musk terminates the deal on his own.
digital advertising crisis
Twitter promises to fight vigorously to drop Musk’s deal and make it happen Uncertainty over the company’s future and its share price comes at a time when concerns about rising interest rates and a possible recession have plagued Wall Street. Shares of online advertising rivals Alphabet, Meta Platforms, Snap and Pinterest have all seen their shares fall an average of 45% in 2022, while Twitter stock has declined just 15% in that time, fueled by the Musk deal in recent months. has come. Daniel Ives, an analyst at Wedbush, said Musk’s filing was bad news for Twitter.
“This is a disaster scenario for Twitter and its board as the company will now fight Musk in a protracted court battle to compensate for at least a $1 billion deal and/or breakup charges,” he wrote in a note to customers.