Elon Musk canceled his $44 billion purchase of Twitter on Friday, claiming that the firm had made “misleading” claims about the amount of false accounts/bots. This was revealed in a regulatory filing.
By pulling out of the April purchase agreement, Musk opened the door to a protracted legal battle including a billion-dollar breakup fee and other issues.
According to CFRA Research senior equity analyst Angelo Zino, Musk’s change of heart about purchasing Twitter looked to show some “buyer’s remorse” for proposing a price of $54.20 per share that now appears “laughable.”
Elon Musk canceled his $44 billion purchase of Twitter on Friday, claiming that the firm had made “misleading” claims about the amount of false accounts/bots.
Elon Musk declares he will not purchase Twitter The billionaire Tesla CEO has changed his mind about purchasing Twitter, but it is difficult to renounce the contract he signed with the social network.
While Musk has asserted that he thinks the percentage is significantly higher, Twitter has maintained that no more than 5% of accounts are managed by software rather than people.
Musk was under pressure since Twitter’s board had recommended that shareholders support the purchase during a special vote that was scheduled to take place in August.
Given the Musk financing angle and the harsh market environment for risk, the Twitter deal “obviously produced upheaval at Twitter and has resulted in an overhang on Tesla’s price since April,” Wedbush analyst Dan Ives wrote in a letter to investors.
Musk backed loans to purchase Twitter with a portion of his riches in Tesla shares, but as market turmoil and other factors drive down the stock price of the electric vehicle firm, he is now facing margin calls to pay any decline.
Elon Musk wants to cancel the terms of his purchase of Twitter.
Musk accuses Twitter of making “false and misleading claims” regarding the prevalence of bogus accounts on its network in a letter to the business that was sent to the Securities and Exchange Commission on Friday. He claims that the corporation has not upheld its duties to give the data and information he claims he needs to assess its operations.
“Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information,”
Musk’s lawyer, Mike Ringler, wrote.
According to legal experts, this might not be enough justification to cancel the $44 billion agreement without Musk being forced to pay a significant penalty. Twitter’s board chair responded to Musk’s letter by announcing that the company would file a lawsuit.
In April, the social networking company was agreed to be purchased by the billionaire CEO of Tesla and Space X. But almost soon away, he began tossing out hints about having second thoughts before coming out and stating it.
He said the purchase was “on pause” in May as he investigated Twitter’s estimation of the proportion of users who are spam or programmed bots rather than actual users. After that, Twitter quickly consented to grant him access to its “firehose,” which is a live feed of more than 500 million tweets every day.
The parties have been exchanging information and attempting to complete the transaction ever since.
Twitter Reaction So Far
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.
Musk must provide evidence that Twitter violated their contract before he may withdraw the signed document on 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 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.
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.
Musk didn’t seem to want to create a cohesive business plan for Twitter as much as he seemed to enjoy the possibility to create optimistic product plans about corporate independence and free expression.
