Well, Twitter is officially taking Elon Musk to court after Musk pulled out of the Twitter deal.
Of course, this should come as no surprise to anyone that Twitter would sue Elon, but is he really in the wrong?
Yes, Elon made a deal with the social media behemoth, but was Twitter truly being transparent when it came down to how many bots are on the site?
At this time, it will be up to a judge to decide if Elon should be forced to still purchase the site, but for now here are the facts laid out and you be the judge.
The drama started in April when it was revealed that the Tesla billionaire had purchased a 9.2% interest in the website, declined an invitation to join its board, and then returned with an offer to buy it altogether for $44 billion in cash. The idea made the Twitter board bristle, but it eventually agreed to the terms.
According to the terms of the offer, Musk would purchase Twitter at $54.20 a share, which is reportedly a 38 percent premium over the stock price from the day before it went public. He would also pay Twitter a $1 billion breakup fee if it decided not to proceed with the buyout.
While others questioned whether this was a prank that was going horribly wrong, Musk was able to secure less than half of the $44 billion needed through bank loans and assistance from wealthy colleagues, and he sold part of his Tesla stock in an effort to raise the remaining half. But as the months passed quickly, the market conditions deteriorated as a result of growing inflation rates, a shaky economy, and the ongoing conflict in Ukraine. As a result, tech stocks suffered. The share prices of Twitter and Tesla both decreased.
Even the richest man in the world cannot compete with the economy. In an attempt to legally dissolve the merger agreement earlier this month, Musk opted to back out of the deal due to his diminishing net worth and financial issues financing an increasingly expensive acquisition.
The head of SpaceX declared in public that the agreement collapsed because Twitter withheld information on the number of bot accounts using its platform and that, as a result, he was no longer going to carry out his plans and owe anyone anything.
Twitter claimed that fewer than 5% of its monetizable daily active users were spammers or bogus accounts. It said Musk is behaving in bad faith by rejecting this and asserting Twitter violated the terms of the agreement as a result. The software tycoon disregarded the necessity of conducting any business due diligence and didn’t begin finding flaws in Twitter’s operations and finances until the board of directors called his bluff and approved the takeover offer.
The lawsuit documents, from Twitter’s point of view, the sticky financial situation Musk got himself into, seemingly by trying to make a 420 joke with his $54.20 offer, and that this is why Musk wanted to bail out. With Tesla’s stock declining in price amid a worsening economic climate in the US and Musk selling off his shares to fund the Twitter acquisition, he dispensed with the banking loan, according to the lawsuit.
Twitter believes Musk should be ordered to stick to the full terms and conditions agreed in the merger deal, including working together to close the acquisition, or more realistically: paying damages and the $1 billion fee for pulling out of the deal. The agreement has an expiration date of October 24.
“Twitter is entitled to specific performance of defendants’ obligations under the merger agreement and to secure for Twitter stockholders the benefit of Musk’s bargain,” the lawsuit stated. “Musk and his entities should be enjoined from further breaches, ordered to comply with their obligations to work toward satisfying the few closing conditions, and ordered to close upon satisfaction of those conditions.”
There is now little reason for either party to compromise, even if this case is expected to go on for years in court. With Twitter, Musk’s team will attempt to play chicken since they know that if the phony account issue is proven to be genuine in court, the firm is doomed, and even if it isn’t serious enough to violate the contract, new information about the company’s internal operations might ruin it. Twitter will fight for the whole sum if the case goes through and Musk is unable to have the severance provision removed. Musk can still argue the valuation. Therefore, I doubt that this will be resolved without going through appeals and counterappeals if it is not resolved in court (years).
Anyone at Twitter must be pondering their possibilities in the interim because remaining loyal to the existing leadership could result in having your name publicly put up for grabs if Musk prevails. Key personnel are debating whether it is even worthwhile to ride the roller coaster when it may be inevitable that the business would fail in either case. The existing management will eliminate individuals whom they feel have divided loyalties.
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