According to a report, Elon Musk’s proposed takeover of Twitter is “seriously jeopardized.” As a result, shares of the company fell 4% in after-hours trading on Wall Street.
According to a Washington Post article citing three people with knowledge of the situation, Musk’s team has halted some discussions regarding financing for the $44 billion deal. According to the report, Musk had come to the conclusion that Twitter’s figures on spam accounts, a sticking point in the deal, could not be independently verified.
Twitter executives defended their spam policy on Thursday, citing a specialized team and automated processes that eliminate 1 million fake accounts daily, but the report claimed that Musk was still unsatisfied despite having access to the company’s feed of public tweet data. Twitter has consistently claimed that fewer than 5% of its daily active users are spam accounts, a claim Musk openly disputes.
According to the report, Musk’s “change in direction” is anticipated soon, suggesting that he will act on threats to try to renege on the agreed-upon deal.
The CEO of Tesla and the richest man in the world, according to legal experts, will struggle to stop the takeover without going to court. The agreement to purchase Twitter contains provisions that allow for “specific performance,” or asking a Delaware court, the US state with jurisdiction over the transaction, to order Musk to complete the acquisition at the agreed-upon price of $54.20 per share. After-hours trading set the price of the shares at $37.10.
According to Brian Quinn, an associate professor at Boston College’s law school, “the Twitter board will eventually grow tired of the shenanigans and will file a suit for specific performance in Delaware.”
If Musk tries to break the deal, Twitter can also demand a $1 billion break fee. However, indications of a legal plan to withdraw first surfaced last month when Musk’s attorneys informed Twitter in a letter that failure to cooperate with the investigation into the spam account issue constituted a “material breach” of the contract. Musk’s legal team claims that failing to disclose information about fictitious accounts violates a covenant in the agreement, a promise to behave in a particular way throughout the sale process, giving him the right to terminate the agreement.
To reassure Musk, Twitter has since provided data for its 500 million daily tweets, but the Washington Post report indicates he is not happy with the findings of his team’s subsequent analysis.
The deal being in alleged “jeopardy,” according to Carl Tobias, Williams Chair in Law at the University of Richmond, is Musk’s most recent case of buyer’s remorse.
“The controversy surrounding bots appeared to be a ruse to avoid having to forfeit the $1 billion breakup fee. Thus, Musk appeared to have been expressing his dissatisfaction with the deal for weeks, and he now seems to be attempting to back out of it.
