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Twitter vows to sue Musk after billionaire pulls out of $44 billion deal

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CNN says Elon Musk has ended his quest to buy Twitter as the world’s richest man withdrew his $44 billion offer to buy the social media company. Sent a letter to Twitter’s top lawyer from an attorney representing Musk says the billionaire wants to pull out of the deal because Twitter “essentially violated multiple provisions” of the sale agreement signed in April. Musk had previously demanded assurances from Twitter that less than 5% of Twitter accounts are fake or spam accounts.

Musk pulls out of $44 billion deal to buy Twitter

The letter reads: “Mr. Musk and his financial advisers at Morgan Stanley have requested critical information from Twitter as early as May 9, 2022 — and repeatedly since — about the relationship between Twitter’s disclosed mDAU (Money Daily Active Users). those verified Twitter members who may receive ads) and the prevalence of fake or spam accounts on the platform.”

Just a few weeks ago, Twitter’s board approved Musk’s $44 billion acquisition. This afternoon, Twitter chairman Bret Taylor said: “The Twitter board is determined to complete the transaction at the price and terms agreed with Mr. Musk and plans to take legal action to enforce the merger agreement. confident that we will prevail in the Delaware Court of Chancery.”
Musk threatened to pull out of the deal almost from the start, complaining that Twitter was not being honest about the number of fake accounts on the site. Twitter says Musk has received the correct information from it and plans to keep him to the deal. The acquisition was originally announced by Musk on April 14, with the Tesla chief saying he would pay $54.20 in cash for every Twitter share, a 38% premium over the stock’s closing price the previous day. .
But Wall Street never felt like Musk would close the deal. As a result, the stock closed continuously each day well below the $54.20 that Musk said he would pay for every share of Twitter. This was a strong indication from serious market traders and those well-versed in arbitration that the deal would not be executed.

Twitter could be entitled to $1 billion breakup fee paid by Musk

Under the terms of the agreement, Musk would owe Twitter a $1 billion breakup fee. This is why Tesla’s CEO is blaming his decision to walk away from the deal on the alleged “false and misleading representations” he claims were made by Twitter. Musk points out that he “properly negotiated the access and information rights under the Merger Agreement so that he can review data and information important to Twitter’s business before financing and completing the transaction.”

Carl Tobias, a law professor at the University of Richmond, stated, “The way these things usually work is that if there’s a billion dollar fee and you’re the one trying to acquire it, it’s being forced against you, unless there’s some sort of material breach or some reason that can be advanced that can convince a court that Twitter, for example, isn’t making the deal.”

There is still a chance the deal could be renegotiated with a lower price more favorable to Musk. To help fund the initial offer, the billionaire had to borrow money against some of his stakes in Tesla, which he reportedly wasn’t happy about. Borrowing against its Tesla shares was a risky move, as a sudden drop in automaker’s stock could have forced Musk to sell additional shares, triggering a margin call.

During regular trading hours on Friday, Twitter shares fell $1.98 or 5.1% to $36.81. In after-hours trading, the stock fell another $1.97 or 5.35% to close out the week at $34.84. The stock’s 52-week high is $73.34 and it has a 52-week low of $31.30.

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