san francisco Tesla CEO Elon Musk has declared his $44 billion takeover attempt over Twitter. In a stock exchange statement on Friday, Musk’s lawyers argued that Twitter misrepresented the number of fake accounts and did not want to release important company data.
Musk is no longer bound by his purchase agreement. “Twitter has not provided the information requested by Mr. Musk for nearly two months,” the statement said. The board of directors of Twitter announced that if necessary, they would legally force Musk to buy the platform.
Musk’s lawyers referred to the weeks-long dispute over the proportion of fake accounts: “For nearly two months, Mr. Musk has sought the data and information necessary to independently assess the prevalence of fake or spam accounts on the Twitter platform,” the letter said. “Twitter failed or refused to provide this information.”
Elon Musk himself had recently repeatedly commented on the purchase of the platform in tweets on Twitter. On Friday, however, he initially gave no information.
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According to its own account, Twitter tried to comply with Musk’s demands. In early June, the company opened up access to its service, allowing Musk and his team to receive and analyze every tweet on the platform as it was published. The company tried to assure to do everything against spam and bot. As recently as Thursday, CEO Parag Agrawal announced that more than a million spam accounts were blocked every day.
Twitter shares fell 7.5 percent in after-hours trading to $34.05. Musk originally offered $54.20 per share. The total volume of the project was around 44 billion dollars.
Elon Musk’s departure is a major setback for Twitter, said Wedbush analyst Dan Ives. “This is a disaster,” Ives wrote. Twitter’s share price will hover around the $25-$30 level once trading reopens on Monday, Ives predicted. “This soap opera has seen many twists and turns, and now Twitter (and its board of directors) is getting 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 pressure Musk into paying a previously negotiated fine of $1 billion, Ives predicted.
Twitter is threatening lawsuits
Twitter CEO Bret Tylor has announced he is ready to take legal action to force Musk to buy Twitter. “Twitter’s board of directors is committed to completing the transaction at the price and terms agreed with Mr. Musk and plans to take legal action to enforce the merger agreement.” He said he was confident his company would prevail in court .
It wouldn’t be the first time that a takeover has ultimately been confirmed in court. Tyson Foods conglomerate boss Don Tyson first signed on to buy food processor IBP but then tried to back out of the deal. IBP then went to court. In 2001, the Delaware judges ruled that the purchase agreement could not be breached.
As part of the deal, Musk agreed to pay $1 billion in compensation should he withdraw from the acquisition. However, this rule retained an exception should there be “material adverse effects”. Musk’s lawyers argued that the current situation is exceptional.
Twitter, on the other hand, repeatedly referred to a passage in the purchase agreement that not only provides for the payment of compensation, 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 on the stock markets. Technology stocks have fallen sharply in value over the past few months. Twitter’s competitor Snap has lost around 65 percent of its value since the beginning of the year. If Musk were looking to buy Twitter today, a significantly lower price would probably be possible. Twitter’s board of directors insists on the purchase agreement concluded in April.
Musk had received the support of prominent financiers such as Oracle founder Larry Ellison and US venture capitalist Sequoia for the purchase of Twitter. Musk is financing around half of the purchase price himself – primarily with loans based on his shares in Tesla. However, since the announcement of the Twitter purchase, the Tesla valuation had fallen by around 14 percent.
Musk justified the attempted purchase 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 concrete plans on how he wanted to change the revenue model of the loss-making platform. He had announced layoffs for the company’s 7,500 employees and set the goal of increasing the user base from the current 229 million to one billion.
Musk is considered the richest person on earth. The US magazine Forbes recently estimated his fortune at $ 265 billion. Much of it is in Tesla shares. Musk also owns companies such as SpaceX, Neuralink and The Boring Company.
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