Elon Musk, said he was terminating his $44 billion (approx. Rs. 3,49,060 crore) deal to buy Twitter because the social media company had breach multiple provisions of the merger agreement.
Twitter’s chairman, Bret Taylor, said on the micro-blogging platform that the board plan to pursue legal action to enforce the merger agreement.
Bret Taylor Said :
In a filing, Elon Musk’s lawyers said Twitter had fail or refuse to respond to multiple requests for information on fake or spam accounts on the platform, which is fundamental to the company’s business performance.
The filing said :
Elon Musk also said he was walking away because Twitter fired high-ranking executives and one-third of the talent acquisition team, breaching Twitter’s obligation to “preserve substantially intact the material components of its current business organisation.”
Elon Musk’s decision is likely to result in a protract legal tussle between the billionaire and the 16-year-old San Francisco-based company.
Dispute 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 complete.
That is because target companies are often keen to resolve the uncertainty around their future and move on.
Twitter is hoping that court proceedings will start in a few weeks and be resolve in a few months, according to a person familiar with the matter.
There is plenty of precedent for a deal renegotiation.
Many companies reprice agreed acquisitions when the COVID-19 pandemic broke out in 2020 and delivered a global economic shock.
In one instance, French retailer LVMH threaten to walk away from a deal with Tiffany & Co.
The US jewelry retailer agreed to lower the acquisition price by $425 million (approx. Rs. 3,370 crore) to $15.8 billion (approx. Rs. 1,25,350 crore).
Ann Lipton, associate dean for faculty research at Tulane Law School Said :
Shares of Twitter were down 6% at $34.58 (approx. Rs. 2,700) in extend trading.
That is 36% below the $54.20 (approx. Rs. 4,300) per share Musk agreed to buy Twitter for in April.
Twitter’s shares surge after Elon Musk took a stake in the company in early April, shielding it from a deep stock market sell-off that slam other social media platforms.
But after he agreed on 25th April 2022 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 clinch the deal to purchase Twitter in April but then put the buyout on hold until the social media company prove that spam bots account for less than 5% of its total users.
The contract calls for Elon Musk to pay Twitter a $1 billion (approx. Rs. 7,900 crore) 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 if Musk terminates the deal on his own.
Some employees express 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 express skepticism about Musk’s plans to loosen content moderation.
Elon Musk’s abandonment of the deal and Twitter’s promise to vigorously fight to complete it casts a pall of uncertainty over the company’s future and its stock price during a time when worries about rising interest rates and a potential recession have hammered Wall Street.
Shares of online advertising rivals Alphabet, Meta Platforms, Snap and Pinterest have their stocks tumble 45% on average in 2022, while Twitter’s stock has decline just 15% in that time, buoyed in recent months by the Elon Musk deal.
Daniel Ives, an analyst at Wedbush, said Elon Musk’s filing was bad news for Twitter.
Daniel Ives Said :
Twitter Workers prepare for More ‘Circus’ After Elon Musk Deal Cancel
Twitter employees express disbelief and exhaustion after billionaire entrepreneur Elon Musk said he was terminating a deal to buy the social media company in what could be the start of months of legal wrangling.
Elon Musk said Twitter breach multiple provisions of a $44 billion (approx. Rs. 3,49,060 crore) merger agreement struck in April, including by failing to turn over sufficient data on spam accounts and letting go of some executives and recruiters.
Twitter’s chairman said the board plan to pursue legal action to enforce the deal.
Engineers, marketing leaders and other staff at the company quickly took to Twitter to publicly post memes, such as of a rollercoaster ride and a baby screaming into a phone, in apparent commentary on the latest development in Musk’s courtship of Twitter since January.
Others joke about the impossibility of breaking their own personal commitments.
Employees have express widespread concern about Elon Musk taking over Twitter because of his preferences for cutting headcount and other costs, decreasing content moderation and limiting remote work.
But Elon Musk’s now-renege offer also marks a 36% premium for the company’s shares and could mean a big payday for employees and other shareholders.
Twitter told employees last month that it was on track to increase the number of users who see ads by 13 million during the just-ended second quarter, the highest such goal it has ever set.
Twitter has not yet announce second-quarter results.
Elon Musk, who is the chief executive of automaker Tesla and rocket company SpaceX, told Twitter staff later in the month on a video townhall that he wants to grow the company to at least 1 billion users from 229 million.
He also told them users should be allowed to post “pretty outrageous things.”
Elon Musk, a prolific user of Twitter, has said in owning a social media service, he could make it more entertaining and maintain it as an essential public forum.
Twitter had over 7,500 employees as of the end of 2021.