Tech Tok: Can Twitter-Musk deal be derailed?
Hyderabad: Tesla founder and world’s richest person Elon Musk has been going back and forth on one of the most popular and controversial deal agreement in the tech world. He first announced that he has reached a deal to buy micro-blogging platform Twitter for $44 billion on April 25. And in less than 50 days, […]
Hyderabad: Tesla founder and world’s richest person Elon Musk has been going back and forth on one of the most popular and controversial deal agreement in the tech world. He first announced that he has reached a deal to buy micro-blogging platform Twitter for $44 billion on April 25. And in less than 50 days, Musk has threatened to cancel the deal citing need for data about fake accounts.
However, what will exactly happen if the Twitter-Musk deal does not come through and can the deal be derailed?
A report by Financial Times on May 19 pointed out that ‘simply abandoning the deal is not an option’. It says that Musk and Twitter both signed the merger agreement, which states that the ‘parties will use their respective reasonable best efforts to consummate and make effective the transactions contemplated by this agreement’.
However, if Musk withdraws from the merger then as a start he will have to pay $1 billion ‘reverse termination fee’ and this can only happen if all the other closing conditions are met and it is only applicable when there is an outside reason a deal cannot close or when there is fraud or the so-called ‘material adverse effect’ involved, says a report by CNBC on May 13. This is exactly what Musk has accused Twitter of committing – a material breach – and has threatened to terminate the deal, reports suggest.
Another big blow, according to the deal agreement, is that not only Musk has to pay the termination fee but Twitter can also enact a clause that could force Musk to complete the deal at $54.20 a share. Guardian report mentions that in Section 9.9 of the agreement entitles Twitter to specific performance, whereby Musk has to pay up if he still has the debt-financing in place and Twitter still wants to close the deal.
The CNBC report also states Musk and his investors would a want Twitter to lower its sale price even as Twitter shares fell in the last few weeks. The report also said that Twitter may not have many good options outside of renegotiating with Musk and it would want to avoid an expensive lawsuit. “Twitter’s best outcome may just be to accept a lower offer from Musk,” it said.
Lastly, if the deal comes through or not, the whole saga has definitely put Musk in a controversial spot in the technology world. Reports suggest that his actions in the past few weeks have definitely tainted his reputation and it could hamper any future agreements and/or takeovers that he plans to do.
Timeline
A look at what transpired between Elon Musk and Twitter
March 26: Musk said that he is giving “serious thought” to building an alternative to Twitter, questioning free speech on the platform and whether Twitter is undermining democracy.
April 4: A regulatory filing reveals that Musk has rapidly become the largest shareholder of Twitter after acquiring a 9 per cent stake, or 73.5 million shares, worth about $3 billion.
April 5: Musk is offered a seat on Twitter’s board. CEO Parag Agrawal said in a tweet that “it became clear to us that he would bring great value to our Board.”
April 11: Twitter CEO Parag Agrawal announces Musk will not be joining the board after all.
April 14: Twitter reveals in a securities filing that Musk has offered to buy the company outright for about $44 billion.
April 15: Twitter’s board unanimously adopts a “poison pill” defense in response to Musk’s proposed offer, attempting to thwart a hostile takeover.
April 21: Musk lines up $46.5 billion in financing to buy Twitter. Twitter board is under pressure to negotiate.
April 25: Musk reaches a deal to buy Twitter for $44 billion and take the company private.
April 29: Musk sells roughly $8.5 billion worth of shares in Tesla to help fund the purchase of Twitter, according to regulatory filings.
May 5: Musk strengthens his offer to buy Twitter with commitments of more than $7 billion from a diverse group of investors including Silicon Valley heavy hitters like Oracle co-founder Larry Ellison
May 10: In a hint at how he would change Twitter, Musk says he’d reverse Twitter’s ban of former President Donald Trump following the Jan 6, 2021 insurrection at the US Capitol, calling the ban “morally bad decision” and “foolish in the extreme.”
May 13: Musk said that his plan to buy Twitter is “temporarily on hold.” Musk said that he needs to pinpoint the number of spam and fake accounts on the social media platform. Shares of Twitter tumble, while shares of Tesla rebound sharply
June 6: Musk threatens to end his $44 billion agreement to buy Twitter, accusing the company of refusing to give him information about its spam bot accounts
