Elon Musk tells Twitter he wants out of his deal to buy it

Elon Musk tells Twitter he wants out of his deal to buy it
Written by admin

New York
CNN Business

Elon Musk moved Friday afternoon to terminate his $44 billion deal to buy Twitter, the latest twist in a whirlwind process in which Tesla’s billionaire CEO became the company’s largest shareholder, turned down a board seat, agreed to buy the social media platform, and then began raising questions about whether to go ahead with the deal. The next chapter in the saga is almost certain to be a court battle.

A lawyer representing Musk claimed in a letter to Twitter

main lawyer that is ending the deal because Twitter

is “in material breach of multiple provisions” of the original agreement, which was signed in aprilin accordance with a regulation presentation Friday afternoon.

Musk has for weeks expressed concern, with no apparent evidence, that there are a greater number of bots and spam accounts on the platform than Twitter has publicly said. Analysts have speculated that the concerns may be an attempt to create a pretext to get out of a deal that it may now see as too expensive, after shares of Twitter and the broader tech market have declined in recent weeks. Tesla

stocks, which Musk planned to rely on in part to fund the deal, have also dropped sharply since agreeing to the deal.

“Twitter’s Board is committed to closing the transaction at the price and terms agreed to with Mr. Musk and plans to take legal action to enforce the merger agreement,” Twitter Chairman Bret Taylor said in a statement. a tweet on Friday, echoing earlier statements by the company that it planned to go ahead with the deal. “We are confident that we will prevail in the Delaware Court of Chancery.”

Twitter shares fell almost 6% in after-hours trading on Friday immediately after the news, after ending the day down 5%. Tesla shares gained more than 1% in after-hours trading.

musk in may said the deal was “on hold” as he assessed the amount of spam and fake accounts on the platform, a reversal of his earlier statements that he wanted to acquire Twitter to root out bots on the platform. Last month he directly threatened to walk away from the deal, accusing Twitter of violating the merger agreement by failing to provide the data it says it needs to assess the amount of spam and fake accounts on the platform. In response, Twitter agreed to hand over its “firehose” tweet stream.

Still, Musk’s attorney alleged in Friday’s letter that Twitter “has failed to meet its contractual obligations” to provide Musk with sufficient data, saying Twitter “appears to have made false and misleading representations about which Mr. Musk trusted” when accepting the deal.

“For nearly two months, Mr. Musk has sought the data and information necessary to ‘conduct an independent assessment of the prevalence of fake or spam accounts on the Twitter platform,'” the Friday letter read. “This information is critical to Twitter’s business and financial performance and is necessary to consummate the transactions contemplated in the Merger Agreement.”

It continues: “Twitter has failed or refused to provide this information. Twitter has sometimes ignored Musk’s requests, sometimes rejected them for reasons that seem unjustified, and sometimes claimed to comply while giving Mr. Musk incomplete or unusable information.”

Twitter has repeatedly said that it has cooperatively shared information with Musk to close the deal on the originally agreed terms.

Twitter shares are trading around $36, nearly 30% lower than their price on the day Musk and Twitter announced the acquisition and well below the $54.20 per share Musk offered, suggesting deep skepticism among investors about the deal at the agreed price. The decline in value may also be one of the reasons Musk is no longer interested in the deal, analysts said.

By accusing Twitter of materially breaching the merger agreement, Musk appears to be making the case that he shouldn’t be hard-pressed for the $1 billion set out in the terms of the deal as a break-up fee should the acquisition fail. according to Carl Tobias, professor of law at the University of Richmond.

“The way these things usually work is if there’s a billion dollar breakup fee and you’re the one trying to acquire, then that’s applied against you,” Tobias said, “unless there’s some sort of material breach or some kind of reason that can be offered to persuade a court that Twitter, for example, is not honoring the deal.”

Musk’s attorney claimed in Friday’s letter that Musk requested, but did not receive, information such as the daily number of monetizable daily active users over the previous eight quarters, as well as access to the “sample set used and calculations performed” by Musk. Twitter to determine that spam and fake accounts account for less than 5% of its monetizable daily user base. Twitter has said that it relies on public and private information, such as ISP numbers and geographic data, from its users to count bots on the platform.

Despite having entered into a binding acquisition agreement, Friday’s letter also states that Musk “negotiated access and information rights under the Merger Agreement precisely so that he could review data and information that is important to Twitter’s business before to finance and complete the transaction.

Twitter is likely to ask the court for two things in its litigation against Musk, said Brian Quinn, a law professor at Boston College. Twitter is expected to seek a ruling that it has not breached its contract with Musk, and will likely seek an injunction requiring Musk to complete the acquisition, he said.

In assessing Musk’s claims, Quinn added, the court is likely to consider the information Twitter has provided so far and whether Musk’s requests for additional disclosures are reasonable and necessary to complete the deal; for example, if the information Musk wants is necessary to obtain regulatory information from the government. funding approvals or commitments.

However, even if litigation continues, the two sides are likely to continue talking, Quinn said, and the situation could be resolved through a renegotiated sale price. That kind of resolution is common in merger disputes, she said, citing the recent deal involving luxury brands Luis Vuitton and Tiffany that went to court but was ultimately completed at a lower price.

Musk’s claim that he needs more information “is a difficult argument to make,” Quinn added. “A judge in Delaware will be quite familiar with how these transactions work and what is normal and what is not.”

About the author


Leave a Comment