San Francisco Tesla CEO Elon Musk has called off his $44 billion takeover attempt of Twitter. In a stock market filing on Friday, Musk’s lawyers argued that Twitter had misrepresented the number of fake accounts and did not want to give out important company data.
Musk is no longer bound by his purchase agreement. “Twitter has not provided the information requested by Mr. Musk for almost two months,” the statement said. The Board of Directors of Twitter announced that it would legally force Musk to purchase the platform if necessary.
Musk’s lawyers referred to the dispute that has been going on for weeks about how large the proportion of fake user accounts is: “For almost two months, Mr. Musk has been trying to get the data and information necessary to make an independent assessment of the prevalence of fake or spam accounts on the Twitter platform,” the letter said. “Twitter has failed or refused to provide this information.“
Elon Musk himself had recently expressed himself repeatedly in tweets on Twitter about the purchase of the platform. On Friday, however, he initially did not provide any information.
Twitter, according to its own account, tried to comply with Musk’s demands. In early June, the company opened access to its service so that Musk and his team could receive and analyze every tweet on the platform as soon as it was published. The company tried to insure everything against spam and bot to undertake. Only on Thursday, CEO Parag Agrawal said that more than a million spam accounts were blocked every day.
Twitter shares fell 7.5 percent to $34.05 in after-hours trading. Musk originally offered $54.20 per share. The total volume of the project amounted to about $ 44 billion.
The withdrawal of Elon Musk is a major setback for Twitter, said analyst Dan Ives of asset manager Wedbush. “This is a disaster,” Ives wrote. Twitter’s share price will move at the level of $ 25 to $ 30 as soon as trading reopens on Monday, Ives predicted. “This soap opera has seen many twists and turns, and now Twitter (and its board of directors) is going back to the drawing board.“
The company will try in court to force Musk to buy the company at a negotiated price of $ 44 billion. In addition, Twitter will try to push Musk to pay a previously negotiated fine of one billion dollars, Ives predicted.
Twitter threatens to sue
The head of the Twitter board of directors, Bret Tylor, has already announced that he is ready to force Musk to buy Twitter in court. “Twitter’s Board of Directors is determined to complete the transaction at the price and terms agreed with Mr. Musk and plans to take legal action to enforce the merger agreement.“ He is confident that his company will be vindicated in court.
It would not be the first time that a company takeover is ultimately confirmed in court. The head of the conglomerate Tyson Foods, Don Tyson, had initially signed the purchase of the food processor IBP, but then tried to get out of the deal. IBP was then taken to court. In 2001, Delaware judges ruled that the purchase agreement could not be broken.
As part of the purchase agreement, Musk had committed to pay compensation in the amount of one billion dollars if he withdrew from the takeover. However, this rule retained an exception, should there be “significant adverse effects”. Musk’s lawyers argued that the current situation is in line with the exception.
Twitter, on the other hand, had referred several times to a passage in the purchase agreement, which not only provides for the payment of a compensation payment, but also regulates the legal framework for an obligation to purchase at the agreed price. The passage called “Specific Performance” also regulates the framework for a legal dispute over the sale of the company.
Musk’s big plans for Twitter
The background to the dispute over the Twitter purchase is also the development in the stock markets. Technology stocks have lost a lot of value over the past few months. Twitter’s competitor Snap has lost about 65 percent of its value on the stock market since the beginning of the year. If Musk were to buy Twitter today, a significantly lower price would probably be possible. The Board of Directors of Twitter insists on the purchase agreement concluded in April.
Musk had the support of prominent donors such as Oracle founder Larry Ellison or the US venture capitalist Sequoia for the purchase of Twitter. Musk is financing around half of the purchase price himself – mainly with loans based on his shares in Tesla. However, since the announcement of the Twitter purchase, the Tesla rating had fallen by about 14 percent.
Musk had justified the purchase attempt of Twitter by wanting to create a platform for free speech. Among other things, he had criticized the blocking of the account of then US President Donald Trump in January 2021 after the attack on the US Capitol as “morally wrong”. He had announced that he wanted to lift Trump’s ban.
Musk had announced that he wanted to make Twitter’s algorithm public. He had left open specific plans on how he wanted to change the revenue model of the deficit platform. For this, he had announced the dismissal of the company’s 7,500 employees, as well as the increase in the user base from the current 229 million people to one billion as a goal.
Musk is considered the richest person on Earth. The US magazine Forbes recently estimated his fortune at $ 265 billion. A large part of this is in company shares of Tesla. Musk also owns companies such as SpaceX, Neuralink and The Boring Company.
