In a tweet this week, Musk said that the “deal cannot move forward” until Twitter provides detailed data about fake accounts – a request that is almost possible to meet.
It is the latest odd statement Musk had made that seems like he is copping out of the deal, experts say.
Meanwhile, Twitter’s board has stated its commitment to completing the transaction on the agreed terms.
Abandoning the deal is not an option, experts say. Musk and Twitter have both signed the agreement, which blatantly states that both parties will use their “respective reasonable best efforts to consummate and make effective the transactions contemplated by this agreement”
There is a $1 billion “reverse termination fee” within the agreement that Musk would owe if he withdrew from the Twitter deal. But if all other closing conditions are met, the only thing left is for Musk to simply show up at the closing, carrying with him his $27.25 billion in equity. Then, Twitter can seek to make Musk seal the deal.
This legal concept is known as “specific performance,” and has become a common feature in leveraged buyouts ever since the 2008 financial crisis.
Could Musk sue his way out of the Twitter deal? If the richest man decides to go to court, he might claim Twitter somehow misrepresented the state of the business by estimating in regulatory filings that “bots” make up about 5 percent or less of its user base. Filing the lawsuit would be easy, but proving the bot issue justifies reneging on the deal would be much harder.
If Musk went to court, he would have to show that any misrepresentation had a “material adverse effect.” This is rarely ever found in courts. He also explicitly waived doing due diligence on Twitter in his offer to the board in his takeover.
Be the first to comment