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Twitter called for legal action against Musk for backing out of the $44 billion acquisition deal with the social media platform.
In a statement on Tuesday, Twitter stated that it is, “committed to completing the transaction on the agreed price and terms as promptly as practicable,”
For the unversed, the historic Twitter deal has been nothing but a rampage of problems for Elon musk. Musk finalized the decision to buy the social media platform on 25 April for all its stakes.
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However what followed was a series of conflicts, defamations, and layoffs along with polarising public opinion regarding both the concerned parties in this deal.
Elon Musk had explicitly stated that he planned to make Twitter a platform that advocated freedom of speech.
But speculations suggested that with this decision, Musk might make Twitter susceptible to political propaganda and hate speech.
Then, around May, Musk suggested that Twitter MUST disclose information regarding the ratio of spam and bot accounts compared to its active user base, otherwise the $44 billion deal can't go forward.
Elon Musk tweet
And now, Elon Musk has finally claimed that the multiple provision breaches by Twitter have forced him to cancel its deal and back out of the $44 billion transactions.
Elon's legal team maintains that Twitter has failed on multiple occasions to provide the necessary information regarding Twitter's spam and bot accounts which is critical to the business' performance.
In a filing, Musk's lawyer stated, “Twitter is in material breach of multiple provisions of that agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement”
Why is Elon Musk terminating the Twitter Deal?
Although according to Elon Musk, he has been forced to back out of the deal because of the multiple breaches of provisions by Twitter, including not providing him with accurate information regarding the company's metrics and firing two major employees right before the deal's completion which might heavily impact the business' performance.
However, speculations emerge that Musk doesn't find the deal enticing enough anymore and he wants to get out of it in any way possible.
This becomes more evident by the fact that Twitter shares have been facing massive downtrends since the Musk-Twitter deal has been public.
Currently, Twitter shares trade at $36.81. Elon Musk bought the company at a price of $54.2 per share.
That's a 32% decline in investment.
Meaning that Musk's $44 billion investment's value currently would just be around $29 billion worth now. (ouch!)
What would the legal battle look like?
Currently, Twitter has a stronger case against Musk. The deal between Musk and Twitter also ensues a break-up fee of $1 billion which Musk must pay if he backs out of the deal while breaching the provisions.
However, this could easily turn into an extended Tussle if Musk stands rigid with his claims.
According to past data, most merger and acquisition disputes are often resolved with the acquirer paying the target company a settlement amount rather than being forced to complete a transaction.
Ann Lipton, Associate dean for faculty research at Tulane Law school stated, “I'd say Twitter is well-positioned legally to argue that it provided him with all the necessary information and this is a pretext to looking for any excuse to get out of the deal.”
One thing that is highly probable is that if Twitter keeps pursuing the legal course, then Musk is bound to lose money!
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