Why did Musk "go back on his word" when he terminated the acquisition of Twitter?
The original title: "The talk collapsed, why did Musk "go back on his word"? "
Original source: Wall Street News
Original source: Wall Street News
Musk's acquisition of Twitter, which has been negotiating for several months, is suspended!
Friday, July 8th, EST,Musk's team terminated the agreement to acquire Twitter on the grounds that Twitter had seriously violated several terms of the agreement.
Twitter responded by saying it would take legal action against Musk to enforce the deal, and said he was "confident" that he would win. Twitter's after-hours decline in U.S. stocks extended to 9% on Friday.
According to the previous agreement, Musk may have to pay a "breakup fee" of US$1 billion for the termination of the transaction.Why did Musk terminate the acquisition of Twitter?On the other hand, Twitter insists on refusing and plans to go to court, what will happen in the future?
Musk terminated the acquisition of Twitter, why?
Tesla CEO Elon Musk said on the 8th local time that he would terminate the acquisition of Twitter on the grounds that Twitter had seriously violated several terms of the agreement. Musk said Twitter had not "complied with its contractual obligations."
The day before, the media thought that the deal might be on the verge of suspension. The article mentioned on Thursday that Musk’s acquisition of Twitter was in serious trouble.Because Musk's camp believes that Twitter's spam account data cannot be verified.
One of the sources said,Musk's team has stopped participating in certain discussions about funding the $44 billion deal.
Negotiations with investors on the deal have cooled in recent weeks, as Musk's camp raised questions about the trove of data they received from Twitter for recent sales to corporate clients. Musk's team was skeptical of the spam data, people familiar with the matter said.indicated that they believed there was insufficient information to assess Twitter's prospects as a business.
Immediately afterwards, Musk said in a letter to Twitter as a regulatory document on Friday:
Twitter company failed to 'comply with its contractual obligations', did not provide information on how to assess the prevalence of bots in social media services.
Twitter had previously provided information "with strings attached, usage restrictions or other artificial formatting features" that made it "little useful."
Twitter did not have normal business operations, imposed a hiring freeze, fired senior leaders, and saw other major departures. The company has not obtained the consent of the parent company for changes in its business conduct,a "material breach" of the merger agreement.
Regarding why Musk terminated the merger and acquisition of Twitter, the media commented that,The fake accounts weren't the only factor that led to Musk's apparent change of heart.
Twitter's shares have fallen from a one-year high of $73.34 to $36.81 on Friday's close, well below Musk's offer of $54.20 per share for Twitter in May. Analysts believe thatSeeking lower prices has become Musk's core appeal after Twitter's stock price plummeted.
Twitter: See you in court!
It is said that the world's major events must be divided for a long time, and they must be united for a long time. In the acquisition of the century between Tesla CEO Musk and social media Twitter, this acquisition, which took many months and stumbled along the way, still could not end with Musk's unilateral "happy breakup".
Because Bret Taylor, a member of the board of directors of Twitter, said that he had received Tesla CEO Musk's intention to terminate the acquisition of Twitter, but Twitter said that it would abide by its commitment and will pay $54.20 per share and the existing agreement. In addition, Twitter also plans to take legal action against Musk to implement this merger and acquisition transaction.
I believe Twitter will prevail in the Delaware Chancery Court.
According to the report, there is a clause in the acquisition agreement that allows Twitter to force Musk to execute the transaction. This may mean that, once it goes to court, Twitter may get permission from the court, so that Musk must complete the transaction instead of just making compensation.
Here comes the question: what is the future
So here comes the question, Musk’s team wants to terminate the acquisition agreement, Twitter insists on refusing and plans to go to court, what is the future?
First of all, according to the legal agreement signed by the two parties before,If either party breaks the deal, they could pay the other $1 billion in fees.Then, the party who terminated the contract will need to pay Twitter a "breakup fee" of US$1 billion, but if Musk insists that Twitter has not complied with the agreement, then the ruling on the fee may go to court.
Second, even if Musk is willing to pay a high price,A "specific execution clause" included in the merger agreement says that as long as Musk still has financing, Twitter can take him to court to force him to go ahead with the acquisition.However, relevant industry sources said this may be an "uphill battle".
It is worth noting, however, that becauseMusk waived all rights to rework the deal when he signed the purchase agreement on April 25, its claim that “Twitter has materially violated multiple provisions of the agreement and made false and misleading statements or had material adverse effects” may have no merit. That is, the court's decision will likely be,A judge enforces the original deal, an outcome that could happen after years of litigation; or renegotiates a lower purchase price.
However, "seeing the court" may be a "burden" and "risk" for both parties.
for twitter, the acquisition of US$54.2 per share without a lawsuit is undoubtedly the most favorable situation it can see at present, after all, from"Poison Pill"Afterwards, the performance of Twitter's shareholders' meeting and board of directors are inclined to complete the transaction. Once resorted to the court, regardless of the time-consuming and labor-intensive, Twitter, whose morale is already low, will exacerbate its uncertainty, which does not bode well for its business prospects.
It's also a risk for MuskIf Musk still wants to acquire Twitter in the future, then everything he does now is "ruthlessly destroying". In addition, Musk's reputation and credit will be affected, which may affect his other investment acquisitions in the future.
The twists and turns of the acquisition road
On April 14 this year, Musk proposed to$43 billionTwitter said at the time that its board of directors "will carefully review the proposal to determine a course of action that is in the best interest of the company and all Twitter shareholders."
Before that, Musk bought a 9.1% stake in Twitter for $2.64 billion. Before Musk intended to buy Twitter, he had accepted an invitation from Twitter to join its board of directors. In response to Musk's takeover proposal, Twitter's board of directors announced the launch of the "poison pill plan," approving shareholders to purchase additional shares in the event of a hostile takeover.
On April 24, several media reported that Twitter was in final negotiations to accept Musk's acquisition proposal, and the deal was expected to be concluded the next day. However, there are also media warnings that the deal may still fall apart at the last minute. Twitter's board of directors publicly unanimously announced on April 25Accepted a $44 billion takeover offer.
After taking over the Twitter company, Musk once again emphasized his future plans for Twitter, including introducing new features, making algorithms open source, reducing spam bots, and authenticating everyone, and proposed to put Twitter at its headquarters in San Francisco. Converted to homeless shelter.
But after entering May, various "moths" appeared on the side of Musk, who had once vowed.
On May 13, Musk announced that he had to wait for Twitter to provide relevant data to confirm that his spam accounts and fake accounts accounted for less than 5%, so he decided to suspend the acquisition, but at the same time said on Twitter that he was still committed to the acquisition. This decision raised concerns about the acquisition in the market and caused Twitter's stock price to plummet more than 20% before the US stock market.
On May 25, Twitter shareholders filed a class-action lawsuit against Musk, accusing Musk of violating California corporate law for market manipulation.
On June 6, Musk sent an email to his lawyer, claiming that Twitter’s refusal to provide user group data upon request may result in “termination of the merger agreement.” In this regard, Twitter stated that it will continue to cooperate with Musk to ensure that the two parties complete the transaction according to the agreement.
In late June, the acquisition took another turn for the worse.
Twitter Inc. has filed a proxy statement for a special meeting of shareholders, according to a June 21 disclosure by the U.S. Securities and Exchange Commission (SEC). Twitter said the board of directors unanimously recommends that shareholders vote to approve the company's merger agreement with Musk, and recommends that shareholders agree to the company's payment of compensation to managers involved in the merger transaction. In addition, if at the time of the special meeting there are not enough votes to pass the merger agreement, the special meeting will be adjourned to seek the advice of other proxies, if necessary or appropriate.
On the 24th, Twitter agreed to provide Musk with more data, including real-time API data. Insiders believe the new data suggests Musk may renegotiate the deal price as soon as possible, saying Twitter's value has changed in response to the new information.
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