Elon Musk Faces Paying Billions Of Dollars After Backing Out Of Twitter Deal, Expert Says
Elon Musk Faces Paying Billions Of Dollars After Backing Out Of Twitter Deal, Expert Says
An expert has warned that Elon Musk could face paying out billions of dollars after walking away from a deal to buy Twitter.
After pulling out of his $44 billion deal with Twitter on Friday, Scott Galloway of New York University said Musk was unlikely to prevail in the ensuing legal dispute with the social media company.
According to him, Musk might be required to pay the difference between the $44 billion he proposed for Twitter and the company’s current worth, which is roughly $28 billion, on the Pivot Podcast.
Musk faces a $1 billion break charge if he backs out of the agreement, but Galloway claimed that fee was now “moot” since Twitter’s chairman was preparing to take serious legal action.
“He owes stockholders, in this case, $17 billion. Twitter’s stock is probably going to plummet. This man might face a $20 billion judgement, “added Galloway.
In a letter to Twitter, Musk’s attorneys said that the social media network had violated their contract by failing to disclose the number of phoney accounts that were present adequately.
Galloway countered that this was not a reason to back out of the agreement.
He claimed that Musk’s promise to pay $54.20 per share for Twitter was made during “a month of mania” and that because his “piggy bank” had shrunk by 40 per cent as a result of the decline in Tesla stock, he was now using bots as a justification to leave.
Since he announced the acquisition of Twitter in April, Musk’s net worth has decreased by $65 billion, and Tesla stock has lost approximately a quarter of its value.
According to a panel of experts, Twitter has the advantage in its conflict with Musk, although the firm is more likely to try to negotiate a cheaper price.
According to Chester Spatt, a finance professor at Carnegie Mellon University’s Tepper School of Business and a former chief economist at the Securities and Exchange Commission, “the Twitter folks may think they’re going to succeed in court, but they want to address the uncertainty.”
Or they believe they should make a small concession to spare Elon’s reputation at the expense of a legal dispute.
With a current share price of $30, according to Wedbush Securities analyst Dan Ives, Twitter is now worth $23 billion, or $21 billion less than Elon offered to pay.
“For Twitter, being in a ‘Game of Thrones court battle’ with the wealthiest individual in the world is far from the vision and goal the company saw in April,” he wrote in a note to customers.
Twitter says it’s going to sue Musk for trying to back out of the deal
Twitter’s message to Elon Musk after he attempts to bail on his $44 billion to buy the company: we’ll see you in court.
Less than an hour after his legal team showed it intended to withdraw from the agreement in a filing with the Securities and Exchange Commission, Twitter’s chairman, Bret Taylor, tweeted, “The Twitter Board is dedicated to completing the merger at the price and conditions negotiated with Mr Musk, and it plans to take legal action to make sure the merger agreement is upheld.” We’re sure we’ll win in the Delaware Court of Chancery.
If you’ve been following the ups and downs of this transaction, you won’t be surprised to learn that Twitter wants to fight it. Musk started laying the groundwork for why he could back out as soon as he announced that he would buy Twitter and take it private, alleging that Twitter wasn’t being transparent about the number of bots on the platform. Musk and the public have been told repeatedly by Twitter that it has bots under control and plans to implement the deal.
Musk and Twitter agreed to pay a $1 billion termination fee when they initially signed the contract in the event the other pulled out for particular reasons. If Musk cannot get the cash he needs to complete the takeover, which he hasn’t done so far, he agrees to pay the price. Additionally, Twitter pledged to pay the fee even if it found a different buyer or the directors advised investors to reject Musk’s offer.
It is obvious that Musk is trying to avoid paying anything since he alleges that Twitter violated the agreement by withholding crucial business information regarding bots. The breakup fee is not mentioned in the filing with the SEC on Friday, stating his justification for pulling out of the contract.
This already bizarre transaction might quickly devolve into a drawn-out, nasty legal dispute, given the company’s declaration that it will try to force Musk to make good. The company’s general counsel, Sean Edgett, told employees in a Friday internal message to Twitter that they should “refrain from Tweeting, Slacking, or giving any commentary about the acquisition” and that management would be “extremely constrained on what we can communicate.”
Edgett replied, “I know this is a difficult moment, and we appreciate your patience and continuous dedication to the crucial job we have underway.”
Here’s why Elon Musk backed out of a $44 billion deal to buy Twitter
The world’s richest man and Tesla CEO Elon Musk said on Friday that he was cancelling his $44 billion attempts to buy Twitter.
Bret Taylor, the Twitter board chairman, reacted by threatening legal action when Elon Musk announced his decision to cancel the agreement.
In a statement, Twitter stated, “We will take legal action to enforce the merger agreement and are committed to completing the transaction on the price and terms agreed upon with Mr Musk. The Delaware Court of Chancery, we are convinced, will rule in our favour.”
Here’s what led Elon Musk back out of the Twitter deal:
Musk has charged Facebook with making “misleading” claims regarding the volume of phoney accounts.
Musk’s representatives claimed Friday in a letter to Twitter included in a regulatory filing that Twitter had made “misleading representations” about the number of spam bots on the social network and hadn’t “complied with its contractual obligations” to provide information about how to gauge the prevalence of the bots.
Tesla’s CEO had previously threatened to back out of the agreement if the business couldn’t demonstrate that fewer than 5% of its daily active users are automated spam accounts. Despite having access to internal data, the Washington Post claims that Musk has been unable to determine what proportion of Twitter accounts are fake. Twitter refuted the assertion, claiming that less than 5% of users are bots while claiming that it removes 1 million spam accounts daily.
Musk further explained that Twitter had not conducted its regular business as usual. The San Francisco-based business implemented a hiring freeze, let go of key executives, and had other departures.
Back in June, Musk publicly charged the microblogging platform with violating the terms of the merger agreement and threatened to walk away and cancel the purchase of the social media firm if it did not give him the information he had asked for regarding spam and phoney accounts. In light of this, Twitter CEO Parag Agrawal defended his business’s long-standing spam metric last month. Twitter said in a statement in June that it “has and will continue to cooperatively exchange information with Mr Musk to consummate the deal in accordance with the provisions of the merger agreement.”
The entire transaction has been a wild and unusual event, mostly taking place on Twitter’s own social network. Within a few weeks, Musk went from being merely a prodigious user to disclosing a sizable position on Twitter and then launching an unsolicited acquisition attempt — without detailed financial plans. Because Musk rejected the chance to look at Twitter’s finances beyond what was already public knowledge, the agreement came together quickly.
After months of erratic ups and downs, mainly due to Musk’s contradictory public pronouncements regarding the merger, his resignation letter further sank Twitter shares.
It plunged the company’s future into uncertainty. Employees were advised on Friday to avoid discussing the deal on Twitter or Slack because it is now considered an active legal case.
What did Twitter tell employees after Elon Musk pulled out of the merger deal?
Musk’s decision to back out of his $44 billion merger with Twitter is the most recent development in the gripping global tale.
On July 8, it was reported that Elon Musk’s attorneys claimed in a filing with the Securities and Exchange Commission that Twitter had neglected to disclose the number of spam accounts using its platform. They believed that this was crucial to the operation of the business.
Twitter announced that it would file a lawsuit to enforce the agreement’s completion. If Musk violates the contract, he might be held liable for a massive $1 billion breakup fee.
According to The Verge website, Twitter staff have received specific instructions to keep quiet about the situation as both parties ponder their next moves.
Twitter’s general counsel, Sean Edgett, told employees to exercise caution because the firm is embroiled in a legal dispute in a memo to the team.
“You should refrain from Tweeting, Slacking, or sharing any commentary about the merger agreement,” Edgett said.
Edgett informed the Twitter team that, for the time being, the business would be able to provide them with very limited information.
He said, “I know this is an uncertain time, and we appreciate your tolerance and sustained dedication to the critical job we have underway.”
Brett Taylor, the chairman of Twitter, has stated that the social network is dedicated to completing the acquisition at a price and under the conditions set forth by Musk.
Edited by Prakriti Arora
