Is Elon Musk Actually Going to Buy Twitter? Can He Just Walk Away?

Billionaire Tesla Inc.

TSLA -3.91%

The CEO recently tweeted that the deal is “on hold” until he has more information about the user portion of the social media platform being spam accounts. Twitter TWTR -2.89%

for many years said in filings they estimated they represented less than 5% of daily active users, though warned the number could be higher.

All of this is happening as tech stocks – including those of Tesla, which Mr. Musk is relying on to fund the deal – are under pressure. Meanwhile, Twitter’s board said it intends to enforce the deal, which calls for him to pay $54.20 for a share.

Here’s what to know about how things could turn out.

Can the two sides leave at any time?

Not easy. Both parties signed a merger agreement, a document detailing exactly what each party will do to ensure the agreed-upon deal closes and what legal rights each party has if the other doesn’t accept it. agree. It is similar to going under a contract for a house.

In this case, Mr. Musk was motivated to quickly negotiate a deal, and in doing so he agreed to sign a contract with some seller-friendly components. For example, he waives the detailed accountability that buyers often make on targets (think of it like omitting a home inspection) and gives Twitter the right to sue him for compliance, something The legal term is called “specific performance.”

Both parties also agree to pay each other a $1 billion breakup fee if they keep the deal from happening for certain reasons, but specific scenarios must open up for those things to happen. suitable. Also known as termination fees, penalties are intended to deter parties from breaching the agreement and to deal with the inconvenience and cost of a failed agreement.

Can Musk pay Twitter a $1 billion breakup fee to get out of the deal?

Unnecessary. There are three obvious situations in which this could happen, and more likely. If the managers try to prevent the deal or the loan from breaking, he is likely to get out. The third is if he can show Twitter has changed dramatically for the worse since the deal was agreed, under a concept known as “severe adverse effects”.

If Mr. Musk believes that Twitter’s calculation of spam accounts was incorrect when he signed the agreement, his lawyers could try to litigate the matter in a variety of ways, including influencing seriously or possibly by alleging that Twitter misrepresented the information in its profile. It is unclear if they will succeed, although it could open the door to settlement discussions.

Elon Musk has cultivated close ties with Beijing to build Tesla’s business in China. Now that he’s buying Twitter and focusing on free speech, the WSJ looks at how China has used the social media platform to promote its views and why that has raised concerns. Photo illustration: Sharon Shi

What will Twitter do?

Twitter’s board of directors feels strongly that the two sides have an agreement that is still valid and is the best option for shareholders. “We intend to close the transaction and enforce the merger agreement,” it said in a statement.

For that reason, Twitter appears open to suing over specific performance if it happens, meaning it could try to force Mr. Musk to stick to the deal or provide what it considers fair compensation. In practice, that can be difficult but often opens the door to settlement discussions.

The mutual agreement also requires Musk to avoid disparaging Twitter and its representatives on the platform, and his recent tweets may have crossed that line. While Twitter can challenge this behavior, for now it seems more focused on closing the deal than launching relatively minor lawsuits that could risk complicating things further.

Pictured: How Elon Musk Made The Fortune He’ll Need To Buy Twitter
What’s happening?

It’s too early to say. A deal is still possible and could end as soon as this summer if both sides keep moving forward. Another possible outcome is that the two sides negotiate a settlement, especially if it becomes clear that Mr. Musk intends to pull out of the deal or try to lower the price.

Even when contract terms are clearly written, more often than not, agreement conflicts end up in negotiated agreements that can include discounts or one-time payments.

In 2020, luxury goods group LVMH Moët Hennessy Louis Vuitton SE attempted to back out of its deal to acquire Tiffany & Co. for $16.2 billion after the pandemic hit demand for high-end jewelry. Tiffany sued to enforce the agreement, and LVMH objected, arguing that the business had been so damaged that their original agreement was no longer valid.

The two parties then agreed to reduce the relatively modest price of $430 million and settle the related litigation.

Write to Cara Lombardo at cara.lombardo@wsj.com

Copyright © 2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

https://www.wsj.com/articles/is-elon-musk-actually-going-to-buy-twitter-can-he-just-walk-away-11652886258?mod=rss_markets_main Is Elon Musk Actually Going to Buy Twitter? Can He Just Walk Away?

Edmund DeMarche

USTimesPost.com is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@ustimespost.com. The content will be deleted within 24 hours.

Related Articles

Back to top button