Elon Musk Cancels Plans To Acquire Twitter For $44 Billion; Twitter Will Sue Elon Musk Now
Elon Musk could be staring at a long legal battle ahead after he pulled out of a deal acquiring Twitter for $44 billion.
He said on Friday he was terminating the deal because Twitter had allegedly breached multiple provisions of the merger agreement.
He accused the company of “actively resisting and thwarting his information rights” as outlined by the deal.
He has continually raised his voice over the issues of the number of spam and bot accounts on the social media platform.
Tussle over bot proliferation
He said in May that he is putting the deal on hold until the company proves that fewer than 5% of its accounts are fake.
Twitter said in a May 2 SEC filing that fewer than 5% of accounts on its platform were fake.
However Musk believes the number to be much higher and demanded an audit of Twitter’s estimates to conduct an independent assessment.
Twitter said they have been sharing some data with Musk but declined to comment on what data was being shared, since it does not share internal data with outsiders due to privacy concerns.
Musk’s team writes “Twitter has failed or refused to provide this information.”
Further, Twitter is being accused of making “false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement.”
Another argument from Musk is that Twitter fired high-ranking executives and one-third of the talent acquisition team.
This breached its obligation to “preserve substantially intact the material components of its current business organization.”
Taking Musk to court
Twitter’s chairman, Bret Taylor, said that the company board intends to take legal action against Musk to enforce the merger agreement.
He wrote that the Board is committed to closing the transaction on the price and terms agreed upon with Musk.
Legal experts say that Twitter is well-positioned legally to argue that it provided Musk with all the necessary information and that this is an excuse to get out of the deal.
Either go through with deal or cough up $1 bn
The contract requires Musk to pay Twitter a $1 billion break-up fee if he backs out of the deal for reasons such as the acquisition financing falling through or regulators blocking the deal.
However Twitter may fight to complete the deal instead of settling for the $1 billion payout.
The company will be fighting the case in a Delaware court.
How the battle could end
Proceedings in such courts play out more often than not with the companies re-negotiating deals or the acquirer paying the target a settlement to walk away.
That is because the litigating 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 resolved in a few months.