On Monday, Elon Musk made his most viable threat to abandon a $ 44 billion deal to buy Twitter, accusing the company of committing a “substantial breach” by failing to disclose the number of bots on the platform.
The letter was published on the website of the US Treasury Department on Monday. He previously tweeted that the deal “cannot go on” until the problem with spam and the fake account is resolved.
His move is the most concrete, suggesting that he may abandon his deal to buy the social media platform, and is the latest in a long and winding saga between Tesla’s CEO and the social media platform.
So how did we get here?
In an April 4 filing with the U.S. Securities and Exchange Commission (SEC), Musk said he had bought nearly $ 3 billion in shares of Twitter, making him the platform’s largest shareholder with a 9.2 percent stake. (Shortly afterwards, the Vanguard Group overtook it, now owns 10.3% of the company and remains the largest shareholder).
On April 5, Twitter announced that Musk would join the board, a move that was quickly canceled when he rejected the appointment and offered to buy the company outright and take it private. His offer was $ 44 billion, or $ 54.20 per share, 38 percent higher than Twitter’s April 1 close.
The Twitter board was ready to implement a “poison pill” policy that would allow existing shareholders to buy shares at a significant discount to dilute the holdings of new investors and prevent the sale. However, negotiations between Musk and the board seem to have changed that – and the deal was approved on April 25.
“Freedom of speech is the foundation of a functioning democracy, and Twitter is the digital city square where issues vital to the future of humanity are discussed,” Musk said in a statement posted on Twitter after the purchase.
“Twitter has huge potential – I look forward to working with the company and users to unlock it,” he added.
The deal passed – and was approved unanimously by Twitter’s board of directors – but the $ 44 billion purchase did not happen overnight. The purchase must be approved by regulators and shareholders and is expected to be completed by the end of 2022.
As the mechanisms of the deal move forward, investors and analysts are holding their breath. Musk can still retire at any time – although he will be charged a “holiday fee” of $ 1 billion for it. The richest man in the world, Musk, is worth $ 218 billion.
There are some indications that Musk is moving forward with the deal. On May 25, documents revealed that he had provided additional funding for the purchase, which would allow him to complete the purchase while having minimal personal debt. These documents revealed that he increased his personal funding for the purchase from $ 27.3 billion to $ 33.5 billion and provided an additional $ 6.25 billion in equity financing.
But the tide changed just weeks later when his lawyers wrote to Twitter on Monday, accusing him of refusing to provide enough information on the number of fake users of the service after Musk asked for additional numbers on May 9. According to him, the information provided on June 1 is insufficient.
“Twitter’s latest offer to simply provide further details on the company’s own testing methods, whether through written material or oral explanations, is tantamount to denying Mr. Musk’s data requests,” the US law firm said in a letter. Skadden, Arps, Slate, Meagher & Flom. .
Such demands lay the groundwork for Musk to step down with fewer penalties, said Anat Alon-Beck, a professor of business law at Case Western Reserve University. Merger agreements usually contain certain “agreements” between the two parties between the signing of the merger agreement and its conclusion.
Musk should not be shut down unless Twitter “has failed to meet or comply in all material respects with its obligations under the agreement,” the agreement said, according to Alon-Beck. This includes an obligation to “provide immediately to [Musk] all information about the business, property and staff of [Twitter] as may reasonably be requested in writing. “
“He may continue to ask Twitter for more information about their problem with the bots,” said Alon-Beck. “Eventually he will ask questions that will not be answered, and then he can leave.”
Add Comment