Problems with Elon Musk's high-stakes plan to pull out of his $44 billion Twitter deal

Late Friday, Musk’s legal team declared its intention to terminate the merger agreement, reiterating its claim that Twitter did not provide him with sufficient information about accounts and saying it was his belief that the share of spam and fake accounts was “significantly higher” than the amount Twitter claims.

They also point to the recent firing of two Twitter executives, the layoff of a third of its talent acquisitions and the departure of several senior executives (reportedly because some of them don’t want to stay on what they hoped to be Musk’s Twitter) as material changes that hurt the business. .

Musk signed a deal with a very limited breakout clause and made an easy exit from it even more difficult by restating back in April that: “I don’t care about the economy at all.”

It was conceived as the purchase of luxury goods by the world’s richest man at a time when his wealth (and ego?) was on the rise. Now he has buyer’s remorse.

Twitter’s board has signaled it won’t let him off his $44 billion easily, saying they will ask a Delaware court to force him to honor the agreement. There is a “specific performance” clause in the agreement that purportedly allows Twitter to enforce the deal and settle it at the price and terms originally agreed upon.

Lawyers in the US have said it was almost, though not quite, without precedent that courts would allow the merger agreement to be torn up.

Musk knows, with hindsight, that he offered at least $10 billion, maybe more, too much.

Musk is the most unusual and eccentric character, however, is not afraid to stick his nose up to authority. He has run battles with the US Securities and Exchange Commission in the past, most notably via a 2018 tweet about his plans to take Tesla private (no actionable plan), which resulted in a $40 million fine for Tesla (half of which he had to pay) and he was forced to step down as Tesla chairman, but no regrets. He exhibits behavior that shows that he sees himself beyond the limits that apply to others; that the rules were for ordinary people, not rich geniuses.

Can Twitter really enforce the deal? Even if the court ruled that Musk had to settle it, would he comply? What will or can the court do if he refuses to comply? Is he good? jail him? The stakes are huge.

Musk knows, with hindsight, that he offered at least $10 billion, maybe more, too much. Twitter knows that if Musk can walk away from the deal, its shareholders will lose at least $16 billion. They will be angry and the director will be the target of lawsuits if they don’t do all they can to enforce the deal.

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Musk may be trying to use threats that he might be allowed to scrap the deal to bring a $1 billion settlement option into the game. From his point of view, that would be the least painful scenario he faced.

For Twitter, however, that would be a paltry outcome for its shareholders, who will face a company whose value will be undermined by the external environment and Musk’s increasingly aggressive criticism of its business model if it weren’t for the bid. This will warrant shareholder action against the board.

There could be a settlement amount of between $1 billion and $44 billion or a revised lower bid price that Twitter and Musk will reluctantly consider as a better option than paying full price, funded by a devalued currency (which means putting rose by far more than his Tesla stock), to acquire a business that is now in worse shape than when the world’s richest man rose high and decided it would be nice to own the world’s “digital town square.”

In the absence of an agreed settlement with a hefty price tag, it may take years and tens, if not hundreds, of millions of dollars in legal fees before the meeting between Musk and the company he once wanted is finalized. Inevitably, there will also be a large number of Delphic Musk’s usual tweets, either Twitter related or anything else that might catch his eye.

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