One Key Term in the Musk-Twitter Agreement Could Decide the Final Outcome of the Saga
A new report says one term in Elon Musk’s merger agreement to buy Twitter could mean that Musk won’t be able to walk away from the deal scot-free.
On Friday, Musk filed a letter with the Securities and Exchange Commission saying that because Twitter did not give him all the information he wanted – chiefly around the issue of fake accounts – the $44 billion deal was off. Twitter issued a statement later in the day, saying it would take Musk to the Delaware Court of Chancery to force him to go ahead with the purchase.
The report by Axios focuses on the term “specific performance.” One part of the agreement imposes a $1 billion breakup fee on Musk if he is responsible for the deal falling apart.
But there could be more. Axios references section 9.9 of the Musk-Twitter merger agreement, noting that it says Twitter that the company “shall be entitled to specific performance or other equitable remedy to enforce [Musk’s] obligations.”
A layman’s translation means that Musk could be forced to buy the company, Axios wrote, citing what it said was a precedent set by the Delaware Chancery Court.
In the case of IBP Inc. v. Tyson Foods Inc, the court forced Don Tyson of Tyson Foods to acquire IBP in 2001 even after he wanted to walk away from the deal.
Interpretations of which side will win or lose, and whether this is really the end of the deal, who will win and who will lose are flowing. From the first, commentators suggested that when Musk began raising the issue of fake accounts, he was looking to either exit the deal or reduce its price.
The twitter deal with Musk is not over. One possibility: a court battle may decimate Twitter as a company, and Musk will be able to buy what’s left of twitter at a much lower price. #ElonMusk #TwitterDeal #FreeSpeech https://t.co/8UQ2yALou5
— Don L Turner (@BridgeToThePast) July 9, 2022
Can Twitter get Elon Musk back on the negotiations table by simply carrying out his request? I think a lot of people (myself included) was very keen to see what he could do on/with social media!https://t.co/sozICTOlpB
— Tony Kariuki Ndonyo (@TonyKariukiN) July 9, 2022
Twitter Will Prevail In Deal Dispute With Musk, Say Legal Experts https://t.co/51Fv7EM8Eu
— Diane Askwyth (@dianerocks52) July 9, 2022
“This was worst case scenario for Twitter, and now it’s happened,” Dan Ives, the managing director and senior equity research analyst covering the tech sector at Wedbush Securities, said, according to The Washington Post.
Ives said Twitter could not only be seen as “damaged goods” by other investors; its stock could also drop further.
Wedbush Securities is projecting that when the stock market opens Monday, Twitter shares will be about 30 percent lower than they were on Friday before Musk announced he wanted out of the deal.
Ives noted that this is more than just a business deal.
“It was a political firestorm that Musk inserted himself into, and now there’s going to be many twists and turns again,” Ives said. “You can’t put the genie back in the bottle.”
Donna Hitscherich, a Columbia Business School professor, said Musk’s filing will bring scrutiny on him and Twitter.
“Is he a material kind of guy who just changed his mind?” she asked.
“Or is there something really there to what he said might be issues with the fundamental nature of the business?”
Truth and Accuracy
We are committed to truth and accuracy in all of our journalism. Read our editorial standards.
Advertise with The Western Journal and reach millions of highly engaged readers, while supporting our work. Advertise Today.
