As expected, Twitter has sued Elon Musk for backing out of his purchase agreement, and the company minced no words in its complaint.
Elon Musk launched a highly publicized takeover attempt of Twitter, only to back out several months later. Musk has accused Twitter of not being forthcoming about how many spam accounts are on its platform and says the company has not fulfilled its commitment to provide him the information he needs to evaluate the company’s health.
Twitter has sued in an effort to keep the deal alive and has fired back at some of the allegations Musk has made, including whether the company was obligated to provide him any information.
On April 25, 2022, Musk, acting through and with his solely-owned entities, Parent and Acquisition Sub, agreed to buy Twitter for $54.20 per share in cash, for a total of about $44 billion.
That price, presented by Musk on a take-it-or-leave-it basis in an unsolicited public offer, represented a 38% premium over Twitter’s unaffected share price. The other terms Musk offered and agreed to were, as he touted, “seller friendly.” There is no financing contingency and no diligence condition (bold ours). The deal is backed by airtight debt and equity commitments. Musk has personally committed $33.5 billion.
The company then goes on to highlight how Musk’s value dropped by $100 billion as a result of the economic downturn and posited that this is the real reason Tesla’s CEO now wants out of the deal.
Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter’s stockholders. This is in keeping with the tactics Musk has deployed against Twitter and its stockholders since earlier this year, when he started amassing an undisclosed stake in the company and continued to grow his position without required notification. It tracks the disdain he has shown for the company that one would have expected Musk, as its would-be steward, to protect. Since signing the merger agreement, Musk has repeatedly disparaged Twitter and the deal, creating business risk for Twitter and downward pressure on its share price. 7. Musk’s exit strategy is a model of hypocrisy.
It’s a safe bet that no one truly believed a deal between Musk and Twitter would be without a measure of drama. With recent events, however, things have become decidedly acrimonious.
Given the situation, it’s hard to guess what would be in Twitter’s best interest: Continuing forward without Musk, or trying to force the deal under such acrimonious terms.