Elon Musk, the chief executive officer of Tesla and the world’s richest person, said on Friday he was terminating his $44 billion deal to buy Twitter because the social media company had breached multiple provisions of the merger agreement.
Twitter’s chairman, bret taylor, said at the micro-running a blog platform that the board deliberate to pursue criminal motion to implement the merger agreement.
“the twitter board is devoted to ultimate the transaction at the rate and terms agreed upon with mr. Musk…,” he wrote. In a submitting, musk’s attorneys stated twitter had failed or refused to respond to multiple requests for information on fake or spam bills on the platform, which is fundamental to the business enterprise’s business overall performance.
“twitter is in cloth breach of a couple of provisions of that agreement, appears to have made fake and deceptive representations upon which mr. Musk relied whilst entering into the merger agreement,” the filing said. Musk also said he turned into walking away due to the fact twitter fired excessive-ranking executives and one-third of the expertise acquisition team, breaching twitter’s duty to “preserve notably intact the cloth components of its current commercial enterprise business enterprise.”
LEGAL BATTLE
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.
Twitter, however, is hoping that court proceedings will start in a few weeks and be resolved in a few months, according to a person familiar with the matter.
There is plenty of precedent for a deal renegotiation. Several companies repriced agreed acquisitions when the COVID-19 pandemic broke out in 2020 and delivered a global economic shock.
Twitter, however, is hoping that court proceedings will start in a few weeks and be resolved in a few months, according to a person familiar with the matter.
There is plenty of precedent for a deal renegotiation. Several companies repriced agreed acquisitions when the COVID-19 pandemic broke out in 2020 and delivered a global economic shock.
In one instance, French retailer LVMH threatened to walk away from a deal with Tiffany & Co. The U.S. jewelry retailer agreed to lower the acquisition price by $425 million to $15.8 billion.
“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,” said Ann Lipton, associate dean for faculty research at Tulane Law School.
Shares of Twitter were down 6% at $34.58 in extended trading. That is 36% below the $54.20 per share Musk agreed to buy Twitter for in April.
Twitter’s shares surged after 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.
But after he agreed on April 25 to buy Twitter, the stock within a matter of days began to fall 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 announcement is another twist in a will-he-won’t-he saga after Musk clinched the deal to purchase Twitter in April but then put the buyout on hold until the social media company proved that spam bots account for less than 5% of its total users.
The contract calls for Musk to pay Twitter a $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.
Some employees expressed disbelief and exhaustion on Friday, publicly posting memes on Twitter, such as of a rollercoaster ride and a baby screaming into a phone, in apparent commentary on the breakup. Employees have worried about the deal will mean for their jobs, pay and ability to work remotely, and many have expressed skepticism about Musk’s plans to loosen content moderation.
DIGITAL AD WOES
Musk’s abandonment of the deal and twitter’s promise to vigorously combat to finish it casts a pall of uncertainty over the corporation’s future and its stock rate throughout a time when worries approximately growing interest rates and a capability recession have hammered wall avenue. Stocks of on line marketing opponents alphabet, meta systems, snap and pinterest have visible their stocks tumble forty five% on common in 2022, even as twitter’s inventory has declined just 15% in that point, buoyed in recent months with the aid of the musk deal. Daniel ives, an analyst at wedbush, stated musk’s filing was terrible information for twitter.
“this is a disaster scenario for twitter and its board as now the organization will war musk in an elongated court docket warfare to recoup the deal and/or the breakup charge of $1 billion at a minimum,” he wrote in a be aware to clients.
