Elon Musk attempts to pull out of $44bn Twitter takeover deal
Image credit: REUTERS/Dado Ruvic/Illustration
Elon Musk might face legal action from Twitter, as the billionaire announces his intention to terminate the deal he made to buy the company for $44bn (£36bn).
Tesla and SpaceX owner Elon Musk is seeking to end his $44bn (£36bn) bid to buy Twitter.
In a Securities and Exchange Commission (SEC) filing, the billionaire's team allege that the social media company had breached the agreement with Musk by providing “false and misleading” statements regarding the number of spam and bot accounts on the platform.
The announcement is the latest twist in a long-running saga after the world's richest person announced hit intention to buy Twitter in April 2022, only to place the deal "on hold" the following month.
However, the billionaire might still be forced to go through with the acquisition. Shortly after Musk's filing was made public, Twitter's chairman Bret Taylor publicly revealed the company's intention to pursue legal action to enforce the agreement and, last night, Bloomberg reported that Twitter had assembled a legal team with this purpose.
"The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk," he tweeted.
Under the terms of the agreement, Twitter can ask a judge for 'specific performance', which would compel Musk to buy the company for the $54.20 per share he originally agreed to. Alternatively, the company can also seek to obtain the $1bn (£830m) break-up fee that the contract contemplated.
To avoid buying the company and paying the break-up free, Musk's team is stating that Twitter breached the agreement first, by misrepresenting the number of spam accounts in its disclosures to the US financial watchdog and failing to consult with Musk when firing senior employees recently.
The billionaire businessman had asked for evidence to back the company's assertion that spam and bot accounts make up less than 5 per cent of its total users. This is not a new problem. Only last year, the company paid $809.5m (£641m) to settle claims it was overstating its growth rate and monthly user figures.
"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," reads the letter filed by Musk to the SEC.
During a weekend appearance at the Sun Valley Conference, the billionaire declined to take questions, but he did address the situation on his Twitter profile.
For many people, including Bloomberg commentator Matt Levine, Musk's attempt to buy Twitter was never serious, and only part of an "appetite for pretending to buy public companies," similar to the time when he announced he would take Tesla public, only to change his mind shortly after.
Musk first made his intention to buy Twitter known in March, after it was revealed that the SpaceX founder had bought a 9 per cent stake in the social media company and had been subsequently invited to join its board.
Only days later, Twitter chief executive Parag Agrawal confirmed that Musk had changed his mind and warned of "distractions ahead" - a prediction that has been proven correct.
The world’s richest man said Twitter has “tremendous potential” that he would unlock, claiming that he wanted to own the company, not for its monetary gain, but for his personal commitment to protecting free speech. In the past, Musk has called for a series of changes to be enforced in the platform, ranging from relaxing its content restrictions to eradicating fake accounts.
“Free speech is the bedrock of a functioning democracy and Twitter is the digital town square where matters vital to the future of humanity are debated,” Musk said.
Musk has an estimated net worth of $273.6bn (approximately £214.71bn), mostly due to his shareholding in electric vehicle-maker Tesla, which he runs, as well as aerospace company SpaceX. In the past, the billionaire has been accused of manipulating Twitter and Tesla’s share price, breaking SEC rules.
However, although Musk announced in May that he had raised $7.1bn from a group of A-list investors to help fund his Twitter acquisition, the remaining $27.3bn of the equity commitment he made to Twitter’s board remains unaccounted for.
In order to finance the acquisition, Musk has been selling some of his Tesla shares and also putting others up as collateral for personal loans to raise cash. But this might not be enough as both Twitter and Tesla's stocks have been going down in the past few months.
Last Friday, Twitter closed at $36.81, despite having reached a closing price of $44.48 on April 12, the day before Musk announced his offer. Meanwhile, Tesla Inc stock, the main source of Musk’s wealth, is down almost 27 per cent since he announced his intentions to own the social media company, making the world's richest person less rich than he was when he agreed to buy a company that is currently worth less of what he might be forced to buy it for.
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