February 4, 2023

Raven Tribune

Complete News World

Twitter vows legal battle after Musk pulls out of $44 billion deal

Twitter vows legal battle after Musk pulls out of $44 billion deal

July 8 (Reuters) – Elon Musk, CEO of Tesla Inc (TSLA.O) The world’s richest person, said on Friday that he had completed his $44 billion deal to buy Twitter (TWTR.N) Because the social media company has breached several provisions of the merger agreement.

Twitter CEO Brett Taylor said on the micro-blogging platform that the board intends to pursue legal action to enforce the merger agreement. Read more

“The Twitter Board is committed to closing the deal at the price and terms agreed with Mr. Musk…” he wrote.

Register now to get free unlimited access to Reuters.com

In a filing, Musk’s lawyers said Twitter failed or refused to respond to multiple requests for information about fake or spam accounts on the platform, which is essential to the company’s business performance.

“Twitter is in material breach of several provisions of this Agreement and appears to have made false and misleading representations on which Mr. Musk relied upon entering into the Merger Agreement,” the filing reads.

Musk also said he was stepping away from the business because Twitter fired CEOs and a third of its talent acquisition team, significantly violating Twitter’s commitment to “maintaining the physical components of its existing business organization.”

legal battle

Musk’s decision is likely to lead to a protracted legal dispute between the billionaire and the 16-year-old company, based in San Francisco.

Disputed mergers and acquisitions that land in Delaware courts often end with deals being renegotiated or the buyer paying the goal a settlement to withdraw, rather than ordering a judge to complete the deal. This is because target companies are often keen to resolve the uncertainty about their future and move forward.

See also  California bans new petrol cars

However, Twitter hopes that court proceedings will begin in a few weeks and be resolved within a few months, according to a person familiar with the matter.

There is plenty of precedent for renegotiating the deal. Several companies re-priced agreed acquisitions when the COVID-19 pandemic erupted in 2020 and triggered a global economic shock.

In one case, French retailer LVMH (LVMH.PA) He threatened to pull out of a deal with Tiffany & Co. The US jewelry retailer agreed to cut its purchase price by $425 million to $15.8 billion.

“I would say that Twitter is legally well positioned to say it provided him with all the necessary information and this is an excuse to look for any excuse to get out of the deal,” said Ann Lipton, associate dean of faculty research at Ann Lipton School of Medicine. Tulane School of Law.

Twitter shares are down 6% to $34.58 in extended trading. This is it 36% below Musk, at $54.20 per share, agreed to buy Twitter in April.

Twitter shares surged after Musk took a stake in the company in early April, shielding it from a deep stock market sell-off that engulfed other social media platforms.

But after it agreed on April 25 to buy Twitter, within days the stock began to fall as investors speculated that Musk might pull out of the deal. With its faltering after the bell on Friday, Twitter’s trading was at its lowest since March.

See also  SAS says survival is at stake as pilot's strike halts flights

The announcement is another development in the will-he-won’t-he saga after Musk struck a deal to buy Twitter in April, but then put the acquisition on hold until the social media company established that spam bots represented less than 5% of its total users.

The contract stipulates that Musk will pay Twitter $1 billion if he cannot complete the deal for reasons such as financing the acquisition or blocking the deal by regulators. However, the separation fee will not apply if Musk terminates the deal on his own.

digital flyer

Musk’s abandonment of the deal and Twitter’s promise to fight hard to complete it casts uncertainty over the company’s future and its stock price at a time when concerns about rising interest rates and a possible recession have roiled Wall Street.

Shares of competitors for online advertising Alphabet (GOOGL.O)identification platforms (META.O)Explode, Explode (SNAP.N) and Pinterest (PINS.N) They’ve seen their stock drop 45% on average in 2022, while Twitter’s stock is down just 15% in that time, buoyed by Musk’s deal in recent months.

Wedbush analyst Daniel Ives said Musk’s introduction was bad news for Twitter.

“This is a disastrous scenario for Twitter and its board of directors as the company will now fight Musk in a protracted court battle to recover the deal and/or breakup fees of a minimum of $1 billion,” he wrote in a note to clients.

Register now to get free unlimited access to Reuters.com

(Greg Romiliotis reports). Additional reporting by Shafi Mehta and Manas Mishra in Bengaluru. Sheila Dang in Dallas; Dawn Chmielewski in Los Angeles; Hyunjoo Jin and Katie Paul from San Francisco; Noel Randewich in Oakland, California; David Shepardson in Washington. Tom Hales in Wilmington, Delaware; Writing by Anna Driver. Editing by Sriraj Kalovila and Lisa Shumaker

See also  Men wearing sticks smash security cameras at an iPhone factory in China

Our criteria: Thomson Reuters Trust Principles.