Elon Musk’s withdrawal from Twitter acquisition has not been easy

Dubai: Ahmed Al Bashir

CNBC said that Elon Musk could not cancel his contract to acquire Twitter by paying $ 1 billion in agreed contract cancellation fees, which was not easy.

On Friday, Musk tweeted that he had decided to suspend his acquisition on Twitter because, as the company has long said, the amount of fake accounts on the platform is actually only 5% of all active accounts. He followed that tweet, in which he reiterated that he was still committed to the acquisition. But he is launching a lawsuit from Twitter for violating the deal, which will cost the world’s richest man billions of dollars.

When both Musk and Twitter agreed to a deal last month, they agreed to a so-called reverse deal avoidance fee of $ 1 billion. Contract cancellation fees, however, are not an option that allows Musk to leave without consequences.

The buyer will be charged a closing fee when the transaction is not completed due to an external reason such as regulatory interference or concerns about third party financing.

A senior M&A lawyer says the market slump, like the current sale, has caused Twitter to lose more than $ 9 billion in market value, which would not be a valid reason for Musk to pull out of the deal.

The lawyer said that if Musk left because he felt he had paid too much to get the site, Twitter could charge him $ 1 billion and sue him for billions in damages. This happened when Tiffany filed a lawsuit against LVMH, a French luxury goods group, for attempting to drop a deal agreed in 2020. The lawsuit was settled out of court, with Tiffany’s agreeing to reduce its selling price from $ 16.2 billion to about $ 15.8 billion.

Muskin’s reason may be to suspend the contract in order to get a better price; Shares of Twitter fell more than 8% on Friday and fell about 23% from the agreed purchase price of $ 54.20. Part of the decline was related to the general decline in technology stocks this month.

Even if the world’s richest man is neutral in price, Musk may feel some pressure or obligation to lower the price for other potential Twitter investors.

Musk has been in talks with external investors about two stocks and preferred funds to reduce his personal stake on Twitter. If he can get a lower price for his Twitter deal, the return to external investors may be higher.