TECH NEWS – Twitter’s shares plunged on Monday after Elon Musk announced he was pulling out of a $44 billion deal to buy the social media platform.
Elon Musk stepped down after claiming that Twitter had not provided enough information about the number of spam and fake accounts on the site. Twitter is planning legal action to complete the deal and has hired a leading US law firm.
Musk has written on Twitter – where else – that Twitter should disclose the “bot information” in court that it claims was not shared with him.
The multi-billionaire then tweeted a picture of American actor and martial artist Chuck Norris at a chess board and, in a subsequent post, wrote: “Chuckmate”. Twitter’s share price stood at around $32.64 at the close of trading on Monday – further below the $54.20 per share buyout price agreed by Elon Musk and Twitter’s board of directors in April. This was the first time investors could react to Musk’s announcement on Friday that he wanted out of the deal.
Elon Musk – who is also the boss of electric car maker Tesla – announced plans to buy Twitter in April, but the deal was suspended a month later over a controversy over the number of fake accounts on the platform. The original merger agreement included a $1 billion breakup fee, but Twitter wants the businessman to compete for the deal instead of Musk having to pay the sum.
“The Twitter board is committed to closing the transaction on the price and terms agreed upon with Mr Musk,” Bret Taylor, the company’s chairman, wrote in a tweet.
Twitter has hired the New York law firm Wachtell Lipton Rosen & Katz, one of the world’s leading corporate law firms. John Coffee, a professor at Colombia Law School and a former adviser to the New York Stock Exchange and Nasdaq, told the BBC that Musk did not have a “great legal argument.”
“It’ll be a big battle, but I would predict it’ll be quietly settled,” he said. “I think Mr Musk doesn’t expect to come out with a victory. I expect that he’s hoping that he can knock another 10 or 20 billion off the price he agreed to pay.”
When he first agreed on the deal, Elon Musk said he wanted to improve the site by “defeating the spam bots, and authenticating all humans”. Twitter has long had a problem with automated so-called “bots” being used to post useless or downright misleading content.
The businessman asked for evidence to support the company’s claim that spam and bot accounts account for less than 5% of all users. Musk believes that spam and bot accounts account for 20% or more of all users.
After Elon Musk announced a deal to buy Twitter in April, shares in his electric car company Tesla fell by around 20%. Musk then sold roughly $8.5 billion worth of Tesla shares, leading to speculation that the money raised would help finance the deal.
According to Ann Lipton, a class action litigator for some of the world’s biggest companies, Musk “kind of got cold feet” when the stock markets turned around and “looked like his wealth was impacted when Tesla’s stock price dropped as well.”
“Now he’s looking for an out but merger agreements are very hard to get out of,” she added. “Even if there was a false representation as Musk claims, he claims that Twitter falsely represented the amount of spam on the platform. You can’t get out of the deal just for that.”
— Elon Musk (@elonmusk) July 11, 2022