Let’s take a look at what happens next, can Elon Musk win the case or is a settlement possible between the two?
Why Is Elon Musk Walking Away From The Deal To Acquire Twitter?
Musk’s pulling out of the deal with Twitter marks the latest turn in a long-running tale after he decided to buy Twitter in April this year. The Tesla chief has claimed that the microblogging platform was in “material breach” of the agreement and had made “false and misleading” statements during deal talks. The focus of Musk’s case pivots on his belief that the count of spam bot accounts on Twitter’s platform is far higher than the company’s declaration of fewer than five per cent of its daily active users.
He first raised the concern regarding spam accounts on the social media platform in May this year. At that point, he had stated that the deal was “temporarily on hold” until he got the data from Twitter. In a filing with the US Securities and Exchange Commission (SEC), the Tesla chief’s lawyers argue that under-representing the number of spam accounts on the microblogging site, which Twitter denies, comprises a “company material adverse effect”, which in effect implies that something is seriously amiss at the business and values nowhere near the $54.20 a share agreed on.
Stating another reason behind pulling out from the deal, Musk said Twitter sacked senior executives and a third of the company’s talent acquisition team, violating Twitter’s responsibility to “preserve substantially intact the material components of its current business organisation.” Besides these broad reasons, several other determinants could have played a role in Musk’s decision. Firstly, a lot of questions have been raised regarding how he would fund the $44 billion deal.
In May this year, Musk informed the US SEC that the deal would comprise $33.5 billion in equity, up from an earlier promise of $27.25 billion. He had also sold his Tesla stock worth approx. $8.5 billion and had secured around $7 billion from investors comprising Prince al-Waleed bin Talal of Saudi Arabia. However, Musk had told the SEC that he was still seeking additional financing and was holding talks with Twitter shareholders, which includes its former CEO Jack Dorsey, about possibly keeping their stakes in the company.
Meanwhile, it is still not clear if he has managed to mobilise enough funds to finance the deal. Secondly, tech stocks worldwide have witnessed a massive correction since the deal was announced. Twitter’s stock has plunged by around 29 per cent since April 25 when it accepted Musk’s offer. The scrip closed at a value of $36.81 on the New York Stock Exchange (NSE) on Friday, as compared to $51.70 on April 25. Meanwhile, Tesla’s stock has dipped by over 24 per cent since the deal was announced.
How Strong Is Elon Musk’s Case?