Elon Musk is formally attempting to renege on his $44 billion deal to buy Twitter. Musk’s team claims he is ending the arrangement because Twitter was in “material breach” of their contract and had made “false and misleading” comments during discussions in a filing with the Securities and Exchange Commission on Friday afternoon.
Despite Musk’s attempted firing, Twitter is still hoping to complete the transaction. The business will “pursue legal action to enforce the merger agreement,” according to Twitter board chairman Bret Taylor, and feels “sure we will succeed” in court.
Since a few weeks after he signed the contract, Musk has been preparing to back out, saying that Twitter issued false statistics regarding the incidence of spam bots on its site. However, it’s not obvious whether Musk can legally back out of the partnership because he doesn’t like that there is spam on Twitter – something he might have looked into before agreeing to the terms of the transaction.
Twitter has gone above and above to demonstrate that it is complying with Musk’s wishes.
The business enabled “firehose” access to its service in early June so that Musk could receive and review each tweet as it was being posted. Additionally, the business has consistently made an effort to convince the public that it has spam and bots under control. In May, its CEO posted a lengthy thread on how Twitter decides how many of its users are bots. On Thursday, it informed the media that it was removing more than a million spam accounts daily.
Additionally, Twitter is accused of breaking its contract with Musk’s team when it fired two top executives, reduced the size of its talent acquisition team, and put a hiring freeze in place during the previous few months without first getting approval to alter its “ordinary course” of operations.
Musk must provide evidence that Twitter violated their contract before he may withdraw the signed document of his own volition. The transaction offered $54.20 per share for Twitter shareholders, up from the $36.81 it ended at today, so there is a good motive for Twitter to want to maintain the agreement. A $1 billion breakup fee, which will be paid by the responsible party, is also on the line.
A judge will hear arguments from Twitter and Musk about whether or not the agreement was broken, but Musk will have a tough time backing out. According to Carl Tobias, a professor at the University of Richmond School of Law, “You’ve got to show that there was something pretty egregious on the other side that wouldn’t allow the agreement to go forward, and I don’t know that he’s going to succeed in convincing judges that that was the case.”
On some level, Musk’s purchase of Twitter had always appeared more like a game than a serious effort to acquire and expand a company. The arrangement first came to light after Musk bought a 9% investment in Twitter (a buying spree he appears to have belatedly disclosed to the SEC about) before promising to sit on the board of directors, moaning about the business on Twitter, and ultimately backing out of his board seat commitment.
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