After several months of uncertainty over Elon Musk’s purchase of Twitter following the fog over the proportion of fake accounts circulating on the platform, the Tesla CEO has decided to abandon the deal. However, the company’s board of directors is keen to finalise the deal, and the matter may well end up in court.
Finally, Elon Musk won’t buy Twitter
For several months, Elon Musk has been cautious about acquiring Twitter, citing the number of fake accounts circulating on the platform. After numerous requests to the board of directors of the social network to obtain more information on this subject, the CEO of Tesla decided to cancel the transaction.
At the beginning of April 2022, Elon Musk had begun to explicitly show his interest in Twitter by buying 9.2% of the company’s shares in a deal worth more than $2.8 billion. He thus became the platform’s first majority shareholder. A few weeks later, the multi-billionaire consolidated his offer by deciding to buy the entire platform for more than 44 billion dollars.
However, according to a document drafted by Elon Musk’s lawyers for Twitter and filed with the U.S. Securities and Exchange Commission (SEC), the deal won’t happen. The reason is that the social network lied about the proportion of fake accounts hosted on its platform. Thus, we can read:
“Mr. Musk is terminating the merger agreement because Twitter is in material breach of several provisions of the agreement, appears to have made false and misleading statements that Mr. Musk relied on when entering into the merger agreement, and is likely to suffer a material adverse effect from the company. “
Further on, the document establishes that Elon Musk repeatedly insisted on obtaining this information, without success:
“For nearly two months, Mr. Musk sought to obtain the data and information necessary to make an independent assessment of the prevalence of fake or spam accounts on the Twitter platform. […] Twitter has failed or refused to provide this information. “
Twitter’s board of directors persists regardless
However, Bret Taylor, Twitter’s chairman of the board, does not intend to stop there. According to him, the transaction must be completed as originally planned
The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.
– Bret Taylor (@btaylor) July 8, 2022
“Twitter’s board of directors is committed to closing the transaction at the price and on the terms agreed to with Mr. Musk and plans to take legal action to enforce the merger agreement. We are confident that we will prevail in the Delaware Court of Chancery. “
However, according to several law professors interviewed by Reuters, such an agreement is not so easily abandoned. Indeed, most of the time, agreements are renegotiated either to revise the acquisition price downwards or to rule on a financial compensation agreement.
So, if the case really does go to court, Elon Musk will have to prove that Twitter’s figures are false, but he will also have to prove how and to what extent the false accounts could harm the platform’s future profits.
A purpose still unclear
Beyond the information concerning the proportion of fake accounts circulating on Twitter, the platform would have committed a fault going against the clauses of the initial contract.
Indeed, according to Elon Musk, Twitter would have fired two high-ranking employees, a senior manager as well as the general manager of consumers, without his consent, thus going against what was mentioned in the purchase contract.
The future of the platform remains uncertain. Will it be decided by a negotiation agreement, or will a real legal battle be launched?
It should be noted that in any case, most of the time, the courts act in a way that is favourable to the companies in this kind of dispute, and order that the transactions be carried out in the way agreed upon in the initial deed.
