What has been hypothesized for months, and for a few days with greater insistence, has occurred: Elon Musk has abandoned the agreement for the purchase of Twitter, for “serious substantial breaches”: this is what happened and the possible legal outlets of the each other.
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For a few days there were rumors of Elon Musk’s intention to exit the agreement to buy Twitter, signed in April, putting on the plate more than 54 dollars per share, for a total of 44 billion dollars, combined in part with personal assets , and in part by taking out a loan from Morgan Stanley. Specifically, the richest man in the world had interrupted discussions with partners regarding the financing of the operation and no longer suggested improvements to the platform.
In the past few hours, as Friday was drawing to a close, an Elon Musk lawyer, according to Reuters identified in the figure of Mike Ringler, wrote to the chief legal officer of social Twitter announcing that Tesla’s CEO was resolving the problem. ‘agreement with the Californian platform, due to substantial violations of the agreement: among these, there is the dismissal of two key Twitter figures (eg the head of revenue) without having gone through the mandatory granting of Musk’s approval.
Above all, for months Musk had been complaining about false statements provided by Twitter at the time of the signing of the merger agreement, so much so that he had already declared it suspended in May. Twitter, meanwhile, provided the requested data (although Musk’s legal representative complains that the counterparty “refused or ignored requests for information”) which, however, would not have allowed the entrepreneur to accurately ascertain the number of fake accounts, impacting on the real amount of future revenues.
Asked about this, the social network Twitter specified that its board, thus refusing the payment of the penalty of 1 billion dollars proposed by Musk, is committed to completing the agreement according to the terms and figures agreed, through an action legal, which is hoped to start in a few weeks and last a few months.
Likely, the matter will be brought before a Delaware court. On the one hand, Musk could invoke the type of MAE dispute, which however was implemented only once, when the German healthcare group Fresenius Kabi AG managed to escape in 2018 an agreement with the drug manufacturer Akorn Inc which had concealed the his serious financial situation. In the case of Twitter, that seems difficult, because according to associate research principal at Tulane Law School, Ann Lipton, Musk is expected to prove not only that Twitter’s data is false, but also so dramatically false as to prejudice future earnings.
Therefore, it is likely that the affair has one of the following two outlets, paths in most cases: either Twitter ascertains a generous compensation that would allow Musk to exit the agreement, or the two parties will renegotiate the agreement downwards, as happened in 2020 when the French luxury brand LVMH threatened to give up the purchase of the American jewelry retailer, Tiffany & Co, in a deal that was revised to $ 15.8 billion, with a cut of 425 million on the agreement. What is certain is that, pending the reopening of the market next Monday, during the closing phase of trading, the stock of Twitter has already registered a decline of 9%.