- Drafting
- BBC News World
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When Elon Musk announced last April that he wanted to buy Twitter, the social network tried to avoid it by all means. Now that the eccentric billionaire has decided to withdraw his takeover offer, the Little Blue Bird company is doing everything it can to force Musk to go ahead with the acquisition.
Why? At stake is the very value of the companywhose shares have not stopped falling since the tycoon announced last Friday that he was withdrawing from the agreement to acquire the platform.
The original merger agreement reached by Twitter with Elon Musk, of US$44,000 million, includes a clause that establishes a penalty of US$1 billion in case either party decides to back out.
However, Twitter does not seek to pressure Musk to pay that amount, but rather wants me to go ahead with the purchaseAs its president, Bret Taylor, assured in a tweet: “Twitter’s board is committed to closing the transaction with the price and terms agreed with Mr. Musk and plans to take legal action to enforce the merger agreement.”
While for the richest man in the world, owner of companies like Tesla or SpaceX, and whose fortune is valued at US$220 billionthe amount of the penalty can be considered almost as small change, on Twitter the swings of the tycoon are doing a lot of damage.
The shares have gone from US$54.20 to US$32.64 in a few days. In other words, the company that Musk agreed to buy for $44 billion is now worth much less, and $1 billion isn’t going to fix the mess.
judicial solution
Twitter is determined to go to court to force the tycoon to go ahead with the purchase. The platform has hired Wachtell Lipton Rosen & Katz of New York, one of the world’s leading corporate law firms. In a letter made public on Monday, the company claims that Musk’s decision is “invalid and unfair” and that it constitutes “a repudiation of his obligations under the agreement.”
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But, while Twitter is threatening legal action, Elon Musk’s response so far has been, as is usual with this unpredictable businessman, mockery and meme. And where? Well, in the same network that no longer wants to buy, Twitter.
“They said I couldn’t buy Twitter. Then they didn’t want to reveal the information about the bots. Now they want to force me to buy Twitter in court. And they’re going to have to reveal the information about the bots in court,” he posted for his more than 100 million followers, with images of him laughing
The billionaire later tweeted an image showing American actor and martial artist Chuck Norris in front of a chessboard, writing:“Chuckmate”, making a play on words with the name of the actor and “checkmate” (checkmate in English). Musk, it seems, is willing to put up a fight.
The dispute over how many bots or fake accounts relentlessly posting useless or misleading content there really is on Twitter has weighed on negotiations from the start. According to the company, bots make up less than 5% of its nearly 230 million total users. Musk believes, however, that they may reach 20% of users, and had asked the company for evidence to back up his figures.
But the indecipherable personality of the billionaire and his negotiating techniques are, for many, disconcerting. At the same time, his lawyers presented legal arguments for Twitter to show them the required information, Musk was dedicated to responding to the explanations of the company’s CEO, Parag Agrawal, with the smiling poop emoji.
What does Musk have to lose?
According to John Coffee, a professor at Columbia Law School and a former adviser to the New York Stock Exchange and Nasdaq, Musk does not have a “great legal argument”, he has told the BBC.
“It will be a great battle, but I predict that it will be resolved quietly. I think Musk does not expect to be victorious. I guess he hopes to be able to reduce another 10 billion or 20 billion of the price he agreed to pay,” says the expert.
Is it then a tycoon’s strategy to end up paying less by company? Could be.
image source, Getty Images
To other observers, such as attorney Ann Lipton, who has handled class-action lawsuits involving some of the world’s largest companies, Musk simply “cowarded” when the stock markets turned and the share price of Tesla, his electric vehicle company and one of his main sources of wealth, fell. Tesla has demanded a third of the value of it since Musk announced his intention to acquire Twitter in April.
“Now it is looking for a way out, but it is very difficult to get out of the merger agreements,” he explained to the BBC. “Even if there was misrepresentation as Musk claims, you can’t get out of the deal just because of that.”
The contract reached in April has a clause that specifies that, in the event of “irreparable damage” such as not carrying out the transaction, the parties have the right to go to a court of equity and compensation to prevent violations of the contract.
If both parties do not reach an agreement, the case must be settled in the Delaware court of equity.
In this case, the court could either release Musk from the obligations agreed in the agreement -something that does not seem likely-, or force him, as Twitter wants, to go ahead with the deal and pay the $44,000 million agreed, or a third option, which would be to force him to pay the $1 billion penalty for abandoning the agreement.
This last option, the experts point out, would be a victory for the tycoonhey a knockout for the company.
This would also add to the difficulties that the platform has been dragging for a long time, such as its problems attracting new users and advertisers.
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What will happen to Twitter now that Elon Musk has withdrawn his buyout offer? – BBC News World