Elon Musk, the richest man in the globe had in April 2022 made an offer of $44 billion to buy 100 percent of Twitter at $54.20 per share in cash, which, at the time, was a 54 percent premium on the price the day he began investing in Twitter.
However, he has announced that he is withdrawing his offer to buy over the microblogging platform.
The billionaire in a filing with the US Securities and Exchange Commission (SEC), over the weekend, said he was terminating the deal because Twitter was in “material breach” of their agreement and had made “false and misleading” statements during negotiations.
In response, Twitter has said it plans to pursue legal action to enforce the agreement.
In May, Twitter informed that it suspended over half a million accounts suspected to be spam every day. In addition to this, it said millions of accounts that are unable to pass human verification are locked each week.
Twitter Chief Executive Officer, Parag Agrawal, had explained the efforts of the company at reducing spam accounts.
He said the company also faced the challenge of many accounts that look fake because they have no pictures, but are later verified to have real humans behind them.
Musk claimed Twitter did not provide him with necessary information on the prevalence of fake or spam accounts on its platform, a concern he first raised in May. At the time, he had said the deal was “temporarily on hold” until he received the data from Twitter, which had asserted that spam and bot accounts make up less than five percent of its total users.
While these are broadly some of the reasons Musk has intimated SEC for terminating the deal, a number of external factors could have also played a role in his decision, according to analysts.
Firstly, tech stocks globally have seen a massive correction since the deal was announced. On Friday, Twitter’s stock on the New York Stock Exchange closed at a value of $36.81, compared to $51.70 on April 25 when the company had accepted Musk’s offer, a decline of nearly 29 percent. Tesla’s stock price has fallen by more than 24 percent since the deal was announced.
Secondly, there were also questions about how Musk would finance the $44 billion deal. In May, Musk had told the US SEC that the deal would include $33.5 billion in equity, up from an earlier commitment of $27.25 billion.
He had also sold Tesla stock worth around $8.5 billion and had lined up about $7 billion from investors including Prince al-Waleed bin Talal of Saudi Arabia. However, he had told SEC that he was continuing to seek additional financing and was in talks with Twitter shareholders, including former Twitter CEO Jack Dorsey, about potentially retaining their stakes in the company.
Going forward, analysts noted that Musk and Twitter could be looking at a lengthy legal battle, as the social media platform has made it clear it will pursue action to enforce the terms of the deal.
“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,” said Twitter’s Chairman, Bret Taylor.
The original merger agreement also includes a $1 billion breakup fee.
Source: Business Hallmark