San Francisco (Reuters)-CEO of car maker Tesla and the wealthiest person in the world, Elon Musk said on Friday (July 8) 44 billion to buy Twitter for social media. It said it would close the US dollar (S $ 61.6 billion). The media company violated several provisions of the merger agreement.

Twitter Chairman Bret Taylor said on the microblogging platform that the board plans to take legal action to enforce the merger agreement.

“The Twitter board has promised to close the deal at the price and terms agreed with Mr. Musk …” he wrote.

During the filing, Musk’s lawyer said Twitter was unable or refused to respond to multiple requests for information about fake or spam accounts on the platform. This is the basis of a company’s performance.

“Twitter has made a serious breach of several provisions of the deal, and seems to have made false misunderstandings that Mr. Musk relied on when concluding the merger deal,” Filing said.

Musk also said that Twitter had dismissed one-third of its high-ranking executives and talent acquisition teams and violated Twitter’s obligation to “maintain the key components of the current business organization virtually intact.” He said he had gone away.

Court struggle

Mr. Musk’s decision could lead to a protracted legal dispute between a millionaire and a 16-year-old company based in San Francisco.

A dispute merger or acquisition landing in a court in Delaware will result in the company renegotiating the transaction or the acquirer paying a settlement to the target, rather than the judge ordering the transaction to be completed. Often. This is because the target company is often enthusiastic about eliminating future uncertainties and moving forward.

But Twitter hopes the proceedings will begin in a few weeks and be resolved in a few months, according to someone familiar with the matter.

There are many precedents for renegotiating transactions.

When the Covid-19 pandemic broke out in 2020 and caused a global economic shock, several companies revised the price of the agreed acquisition.

In one example, French retailer LVMH threatened to leave the deal with Tiffany. US jewelery retailers have agreed to reduce the acquisition price from US $ 425 million to US $ 15.8 billion.

“I think Twitter is in a legal position to claim that it has provided him with all the information it needs. This is an excuse to find an excuse to get out of the deal,” said the faculty member. Ann Lipton, Vice Dean of Research, said. At Train Law School.

Twitter’s share was $ 34.58, down 6% in after-hours trading. That’s 36% below $ 54.20 per share, which Musk agreed to buy Twitter in April.

After Musk invested in the company in early April, Twitter’s stock soared, protecting Twitter from a major sale of the stock market that blamed other social media platforms.

However, after agreeing to buy Twitter on April 25, stock prices began to fall as investors speculated that Mr. Musk could leave the deal. With a fall after the bell on Friday, Twitter has been trading at its lowest since March.

The announcement is another willingness to put the acquisition on hold until Musk signed a deal to buy Twitter in April and the social media company proved that Spambot has less than five accounts. It’s a twist. Its total user cents.

The deal requires Mr. Musk to pay Twitter a $ 1 billion installment if he is unable to complete the transaction due to reasons such as a failed acquisition fund or a regulatory blockade. However, if Mr. Musk closes the transaction himself, the split fee will not apply.

Digital advertising issues

Twitter’s promise that Musk will abandon the deal and fight vigorously to complete it will hurt the company’s future and stock prices at a time when rising interest rates and potential recession concerns struck Wall Street. Throw certainty.

Online advertising rivals Alphabet, Meta Platforms, Snap and Pinterest’s share plummeted an average of 45% in 2022, while Twitter’s share fell by just 15% in the meantime, supporting Musk’s trading in recent months. It has been.

Wedbush analyst Daniel Ives said Musk’s submission was bad news for Twitter.

“This was a catastrophic scenario for Twitter and its board of directors, and the company is now fighting Mask and engaging in a lengthy court battle to regain transactions and split fees of at least $ 1 billion,” he told clients. I wrote it in a memo.

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