Twitter shares decreased in value by 4.2% in after-hours trading.
It’s looking more and more like Elon Musk could bail on buying Twitter.
$44 Billion Twitter Acquisition In Jeopardy
The Washington Post recently stated that Elon Musk’s $44 billion deal to acquire Twitter is “in peril,” based on three anonymous individuals who told the publication that Musk has “stopped engaging in certain discussions around funding” for the acquisition.
Fidelity, Larry Ellison, Binance (crypto exchange), venture capital firm Andreessen Horowitz, and Qatar’s state investment firm are also joining Musk in his efforts to acquire the company.
The main concerns which have steered the deal off of its path are due to concerns that Twitter’s data is inaccurate.
The immense number of bots and spam accounts on the platform is more, making data unverifiable.
Supposedly, Twitter had a conference call with media outlets to explain that its spam account data and technology for blocking bots are “just fine,” increasing tensions between the company and Musk.
After Elon tweeted saying the deal was “on hold,” Musk’s lawyers sent a letter to Twitter claiming the company was in “clear material breach” of the acquisition deal by refusing to give Musk access to the data. Twitter ended up giving Musk access to the data backing its claims that bots only represent less than 5% of daily active users, but Musk does not believe their claims.
Twitter stated that they have a specialist team and automated systems that weeds out 1 million fake accounts per day.
“Musk is Still Committed to a Deal…”
The SpaceX founder and father of 9 said that he was “still committed to a deal,” but in a research note on Thursday, Wedbush analysts Daniel Ives and John Katsingris mentioned the odds of the original deal closing has grown slim.
A “change in direction” from Musk is looking more and more realistic, indicating he really may just walk away from the deal…
“Eventually, the Twitter board will tire of the shenanigans and will file a suit for specific performance in Delaware,” said Brian Quinn, a professor at Boston College law school.
Musk Faces a $1 Billion Fee
If Musk attempts to pull out of the deal, Twitter can demand a $1 billion break fee.
To no surprise, Musk is already ahead of the game.
His team is prepared to take these matters to court if Twitter gives him a tough time.
Musk’s lawyers sent a letter to Twitter warning that refusal to cooperate over the spam account issue represented a “material breach” of the agreement. His legal team is arguing that failure to provide information about false accounts breaches a covenant in the agreement, a promise to act in a certain way during the sale process, which would allow him to walk away from the deal.
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