Tech billionaire pulls back on Twitter purchase His lawyers point to allegedly incomplete information on the number of fake accounts, but the online service is sticking to the deal.
The turbulent Twitter takeover by Elon Musk has reached chaos level: the tech billionaire is withdrawing from the purchase, but the company wants to push the deal through in court.
Musk’s lawyers justified the withdrawal on Friday with allegedly insufficient information on the number of fake accounts on the short message service. Twitter was convinced that it would prevail in a legal dispute. Twitter shares fell more than 5 percent in after-hours trading on Friday.
Musks Critical Moment Twitter
Musk’s turnaround does not come as a surprise: Musk had publicly questioned the Twitter numbers for weeks. This was interpreted by observers as an attempt to at least lower the price. At his bid, the deal would be worth more than $44 billion, while Twitter was last worth around $28 billion on the stock exchange. Observers had speculated that given the price difference, Musk was no longer willing to stick to the original bid.
Musk had planned to buy Twitter in the spring. He repeatedly emphasized that he was not concerned with money, but above all with strengthening freedom of speech on the platform. Musk said he would let former US President Donald Trump, who was banned from Twitter, back on the platform.
The board of directors of the online service initially blocked Musk’s bid of $54.20 per share, but then accepted it. Next, in the coming months, shareholders should vote to sell their stake to Musk. Musk’s price would be a good deal for many of them: Even before his withdrawal on Friday, the paper was only $ 36.81 from US trading.
Musk has been trying since mid-May to address Twitter’s allegedly false estimates of the number of spam and fake accounts. He therefore already declared the takeover deal to be suspended. Musk’s lawyers said Twitter had failed for almost two months to provide Musk and his advisory staff with the data access they needed to verify fake account information. Among other things, calls via interfaces were limited. Musk’s side describes this as a breach of contractual obligations, which justifies a termination of the purchase agreement. US observers doubt whether the court in Delaware sees it the same way.
Twitter has estimated — and has for some time — that the number of fake accounts is less than 5 percent. Musk doubted that – even after he had signed the acquisition agreement.
Twitter sticks to deal
Twitter does not want to let Musk out of the purchase agreement. Board Chairman Bret Taylor said the company is committed to completing the sale at the price agreed with it and plans to take it to court.
Musk and Twitter have agreed to a $1 billion penalty if either party fails to go through with the deal. However, it is more about problems such as failed financing than about an about-face.
Musk is already a major shareholder with a stake of a good nine percent, which he bought on the stock exchange before the takeover plans were announced. There was trouble here too. For example, Musk failed to meet the deadline by which it must be made public if the participation exceeded five percent. Since the share price jumped after this announcement, Musk is accused in an investor lawsuit that the delay saved him a lot of money when buying more shares.
Even if Musk emphasized that the Twitter deal was not about money, he would have had to use part of his fortune for it. The boss of the electric car manufacturer Tesla and the aerospace company SpaceX is by far the richest man in the world – but his property, estimated at over 220 billion dollars, consists mainly of shares. In order to make money liquid, he parted with part of the share certificates. He also wanted to take out loans and get other lenders on board.
For Twitter, the development potentially means more months of uncertainty. The online service has already cut its spending.
Attempts to call off takeovers of this magnitude rarely happen, but they do happen. The French luxury goods conglomerate LVMH, for example, wanted to cancel the takeover of the US jeweler Tiffany, citing business slumps in the corona pandemic. The dispute ended with Tiffany accepting a lower bid of $131.5 per share instead of the original $135.