More reasons are emerging on why the Chief Executive Officer of Tesla and the world’s richest man, Elon Musk, is pulling out of his $44 billion bid to buy microblogging platform, Twitter.
But almost three months after, precisely at the weekend, in a filing with the US Securities and Exchange Commission (SEC), Musk said he wanted to terminate the deal because Twitter was in “material breach” of their agreement and had made “false and misleading” statements during negotiations.
The social media company, meanwhile, has said it plans to pursue legal action to enforce the agreement.
Twitter Chief Executive Officer, Parag Agrawal, had explained the efforts of the company at reducing spam accounts.
He said the company also faced the challenge of many accounts that look fake because they have no pictures, but are later verified to have real humans behind them.
Musk claimed Twitter did not provide him with necessary information on the prevalence of fake or spam accounts on its platform, a concern he first raised in May. At the time, he had said the deal was “temporarily on hold”, until he received the data from Twitter, which had asserted that spam and bot accounts make up less than five per cent of its total users.
Firstly, tech stocks globally have seen a massive correction since the deal was announced. On Friday, Twitter’s stock on the New York Stock Exchange closed at a value of $36.81, compared to $51.70 on April 25 when the company had accepted Musk’s offer, a decline of nearly 29 per cent. Tesla’s stock price has fallen by more than 24 per cent since the deal was announced.
Secondly, there were also questions about how Musk would finance the $44 billion deal. In May, Musk had told the US SEC that the deal would include $33.5 billion in equity, up from an earlier commitment of $27.25 billion.
He had also sold Tesla stock worth around $8.5 billion and had lined up about $7 billion from investors including Prince al-Waleed bin Talal of Saudi Arabia. However, he had told SEC that he was continuing to seek additional financing and was in talks with Twitter shareholders, including former Twitter CEO Jack Dorsey, about potentially retaining their stakes in the company.
“The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery,” said Twitter’s Chairman, Bret Taylor.
The original merger agreement also includes a $1 billion breakup fee.
According to Reuters, disputed mergers and acquisitions that land in Delaware courts, more often than not, end up with the parties re-negotiating deals or the acquirer paying the target a settlement to walk away, rather than a judge ordering that a transaction be completed.
