Elon Musk is going to halt his $44bn (£36bn) offer to buy Twitter because they say he broke the deal.
Elon Musk, Tesla CEO and the world’s richest man, intends to withdraw his $44 billion offer to acquire the microblogging platform Twitter.
Musk stated in a filing with the US Securities and Exchange Commission (SEC) that he wanted to terminate the deal because Twitter was in “material breach” of its contract and had made “false and misleading statements” during negotiations.
Meanwhile, the social media company has stated that it will take legal action to enforce the agreement. Musk’s decision to back out of the deal is the latest development in a long saga that began in April when he decided to buy Twitter.
Why is Musk pulling out of the deal?
Musk says Twitter has not provided him with information he requested in May about the prevalence of fake or spam accounts on its platform. At the time, he claimed the deal was “temporarily on hold” until he received data from Twitter indicating that spam accounts and bots make up less than 5% of total Twitter users.
Musk’s legal team stated in a filing with the US SEC that “for nearly two months, Mr. Musk has sought the data and information necessary to conduct an independent assessment of the prevalence of spam or fake accounts on the Twitter platform…Twitter has been unable or unwilling to provide this information Twitter has sometimes ignored Mr. Musk’s requests, sometimes refused them for seemingly unjustified reasons, and sometimes claimed to comply while providing him to Mr. Musk incomplete or unusable information.”
Musk also stated that he was leaving because Twitter fired senior executives and a third of its talent acquisition team, in violation of Twitter’s obligation to “maintain substantially intact the material components of its existing business organization.”
While these are the two main reasons Musk cited the SEC for terminating the deal, a number of external factors may also have played into his decision. Since the announcement of the deal, global technology stocks have suffered a massive correction. Twitter’s closing share price on the New York Stock Exchange on Friday was $36.81, up from $51.70 on April 25 when the company accepted Musk’s offer. This represents a decrease of nearly 29 percent. Since the deal announcement, Tesla’s stock price has fallen more than 24%.
Second, it was unclear how Musk would finance the $44 billion transaction. Musk informed the US Securities and Exchange Commission in May that the deal would include $33.5 billion in stock, up from a previous commitment of $27 billion. He also sold Tesla shares for about $8.5 billion and raised $7 billion from investors, including Saudi prince al-Waleed bin Talal. However, he informed the SEC that he was continuing to seek additional funding and was in talks with Twitter shareholders, including former Twitter CEO Jack Dorsey, about the possibility of retaining the company’s stakes. It is unknown if Musk has raised enough funds to finance the transaction.
What happens next?
The social media platform has made it clear that it will take legal action to enforce the terms of the deal, which could lead to a lengthy legal battle between Musk and Twitter.
“The Twitter Board is committed to closing the transaction at the price and terms agreed to with Mr. Musk and intends to take legal action to enforce the merger agreement. “We are confident that we will prevail in the Delaware Court of Chancery,” said Bret Taylor, president of Twitter. The original merger agreement contains a $1 billion termination fee.
According to Reuters, disputed M&As reaching Delaware courts result in parties renegotiating deals or the acquirer paying the target an agreement to pull out, rather than a judge ordering a transaction to be completed.
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Categories: Technology
Source: vtt.edu.vn