Did Elon Musk Really Purchase Twitter? Looking at The Future Stake Of the Tech-Giant Company
It’s no longer news that Elon Musk purchased a large shares at the multi-billion dollars company Twitter, but what you may not have known is that there’s an ongoing battle within the company’s small circle, which I’ll be discussing intensively below…
On April 4th, the 50 years old billionaire purchased approximately 9% of Twitter shares, and made a bid to own the company in its fullness. But due to some unforeseen circumstances, he had developed some cold feet and hesitations in going along with the deal.
But hey, you can’t just back out of a deal you made with one of the biggest tech firms in the world and go Scott free like nothing ever happened, can you? OK below are Elon’s options should he try to abandon the $44 billion deal…
Elon Musk was motivated to quickly negotiate his Twitter deal and agreed to a contract with several seller-friendly components.
There are signs Elon Musk may be getting cold feet a few weeks after he agreed to buy Twitter Inc. for $44 billion.
The billionaire Tesla Inc. chief executive recently tweeted that the deal is “on hold” until he gets more information about the portion of the social-media platform’s users that are spam accounts.
Having a fresh look at this, one should consider the fact that most social-media outlets would definitely or possibly employ the use of bots or spam accounts to keep the statistical analysis of active users activities up to the highest possible value, show off!
Twitter has for years said in filings that it estimates they represent less than 5% of its daily active users, though has cautioned the number could be higher.
This is all happening as technology shares including those of Tesla, which Mr. Musk is relying on to fund the deal have been under pressure. Twitter’s board, meanwhile, says it intends to enforce the agreement, which calls for him to pay $54.20 a share.
Now before we proceed, there something you should be aware of, both parties signed a merger agreement, a detailed document stipulating exactly what each will do to ensure the agreed-upon deal closes, and what legal rights each has if the other doesn’t hold up its end of the bargain. Let me make this clearer, this deal is simply deciding to enforce an act of an agreement in a scenario where by two parties have agreed to make a deal and one decides to back out before the close of the deal.
So in this case, Mr. Musk was motivated to quickly negotiate a deal, and in doing so, agreed to a contract with several seller-friendly components. For example, he waived the detailed due diligence that buyers typically perform on targets (think of it like skipping a home inspection), and gave Twitter the right to sue him to follow through with the deal, a legal clause known as “specific performance” just because he felt that the company was already established and had a big name, so what could possibly go wrong?
Here’s a bomber! Did you know that they also agreed to pay each other a $1 billion cancelation fee if they cause the deal not to happen for certain reasons, but specific scenarios must unfold for those to become relevant. Also called termination fees, the penalties are meant to deter parties from breaking agreements and address the inconvenience and cost of a failed deal.
Can Mr. Musk just pay Twitter the $1 billion breakup fee to get out of the deal? Not necessarily. There are three clear scenarios in which this could happen, and possibly more. If regulators try to block the deal or the debt financing falls through, he would likely have an out. The third is if he can show Twitter has significantly changed for the worse since the deal was agreed upon, under a concept known as a “material adverse effect.”
If Mr. Musk believes Twitter’s accounting of spam accounts was inaccurate when he signed the deal, his lawyers could attempt to litigate that issue in various ways. Including as a material adverse effect, or possibly by alleging that Twitter misrepresented information in its filings. It is unclear whether they would succeed, though it could open the door to settlement discussions.
So what’s going to be the future of Twitter?
Twitter’s board feels strongly that the two sides had an agreement that remains in effect and is the best option for shareholders. “We intend to close the transaction and enforce the merger agreement,” it said.
For that reason, Twitter appears willing to sue for specific performance if it comes to that, meaning it could try to force Mr. Musk to follow through with the deal or provide what it sees as fair compensation. In practice, that can be difficult but often opens the door to settlement discussions.
The agreement between the two sides also requires Mr. Musk to avoid disparaging Twitter and its representatives on the platform and his recent tweets could have crossed that line. While Twitter could challenge the behavior, it appears more focused at the moment on closing the deal rather than launching relatively minor litigation that could run the risk of complicating things further.
It is too early to say. The deal could still happen, and could close as soon as this summer if both sides keep moving forward. Another possible outcome is that the two sides negotiate a settlement, especially if it becomes clear that Mr. Musk is intent on getting out of the deal or trying to lower the price.
Even when contract terms are clearly spelled out, more often than not deal clashes end in negotiated settlements that can include a price cut or one-time payments.
In conclusion, we might be seeing a scenario that would play out where Elon Musk pays the break up fee and moves on, certainly if he isn’t satisfied with the terms and conditions that keeps unfolding.
And without surprise, most of Twitter staffs are beginning to show a high level of unrest and uncertainty pertaining to the company’s future, which is very much observable from their tweets.
This being said we should expect a downturn in Twitter’s stock prices in the global market and forex exchange, but nothing is certain for sure until it plays out. We’d keep bringing updates as the news unfolds keeping our fingers crossed.