‘Why Musk is ending $44 billion Twitter deal’ – Technology – The Guardian Nigeria News – Nigeria and World News
More and more reasons are emerging as to why Tesla’s chief executive officer and the world’s richest man, Elon Musk, are pulling out of his $44 billion bid to buy microblogging platform Twitter.
Musk had made an offer in April to buy 100 percent of Twitter for $44 billion at $54.20 a share in cash, which at the time was a 54 percent premium to the price on the day he began investing in Twitter. Twitter.
But nearly three months after, just over the weekend, in a filing with the U.S. Securities and Exchange Commission (SEC), Musk said he wanted to end the deal because Twitter had “materially violated” their agreement and made “false and false allegations.” had made. misleading” statements during negotiations.
The social media company, meanwhile, has said it plans to take legal action to enforce the agreement.
In May, Twitter said it has suspended more than half a million accounts believed to be spam every day. In addition, according to the company, millions of accounts are locked every week that cannot pass human verification.
Twitter Chief Executive Officer, Parag Agrawal, had explained the company’s efforts in reducing spam accounts.
He said the company also faced the challenge of many accounts that look fake because they don’t have photos, but are later verified to have real people behind them.
Musk claimed that Twitter had failed to provide him with the necessary information about the prevalence of fake or spam accounts on his platform, a concern he first raised in May. At the time, he had said the deal was “temporarily on hold” until he received the data from Twitter, which claimed spam and bot accounts make up less than five percent of total users.
While these are broadly some of the reasons Musk has told the SEC to end the deal, analysts say a number of outside factors may also have played a role in his decision.
First, technology stocks worldwide have undergone a massive correction since the deal was announced. On Friday, Twitter’s stock closed on the New York Stock Exchange at $36.81, compared to $51.70 on April 25 when the company accepted Musk’s offer, a drop of nearly 29 percent. Tesla’s stock price has fallen more than 24 percent since the deal was announced.
Second, there were also questions about how Musk would fund the $44 billion deal. In May, Musk had told the US SEC that the deal would involve $33.5 billion in equity, compared to a previous pledge of $27.25 billion.
He had also sold Tesla stock worth about $8.5 billion and had drawn up about $7 billion from investors, including Prince al-Waleed bin Talal of Saudi Arabia. However, he had told SEC that he was continuing to seek additional funding and was in talks with Twitter shareholders, including former Twitter CEO Jack Dorsey, about potentially keeping their stake in the company.
Going forward, analysts noted that Musk and Twitter may face a lengthy legal battle as the social media platform has made it clear it will take action to enforce the terms of the deal.
“The Twitter Board is committed to closing the transaction at the price and terms agreed with Mr. Musk and plans to take legal action to enforce the merger agreement. We are confident that we will prevail in the Delaware Court of Chancery,” said Twitter chairman Bret Taylor.
The original merger agreement also includes a $1 billion split fee.
According to Reuters, disputed mergers and acquisitions that end up in the Delaware courts more often than not end up with the parties renegotiating deals or the acquirer paying the target a settlement to walk away, rather than a judge ordering that a transaction is completed .