News broke on Monday, October 10, that Twitter and Elon Musk had come very close to negotiating a purchase deal. Yet, the talks broke down once again, and the concerned parties couldn’t materialize the deal.
The Background
Earlier this year, the world’s richest man became the majority shareholder of the social media giant Twitter. Shortly after, he made a staggering $44 billion offer to buy out the platform outright.
The following months saw a whirlwind of activity as Musk tried to renege on his offer, claiming Twitter misled him on the number of bot accounts on the platform. This prompted Twitter to sue him in July. In September, another twist occurred when the platform’s shareholders approved Musk’s takeover at $54.20 per share. Granted, this amount came at a 38% premium at that time.
A Win-Win Offer
Musk and Twitter were in talks last week for the billionaire to complete the purchase at $50 per share. This would take $3.3 billion off the initial price, approximately an 8% discount. On Friday, Twitter shares closed at $49.13 per share, 9% less than the $54.20 first offered in April.
With this price drop, $50 per share would have been a premium for Twitter while an additional discount for Musk. This would have been a win-win situation for both parties. So, the question is, what happened?
The Control Factor
According to Alex Spiro, Elon Musk’s attorney, Musk ultimately decided to stick with the original number of $54.20 a share to override Twitter’s terms. The platform’s executives and shareholders apparently had several contingencies regarding a negotiated deal. Musk refused to accept these conditions and thus offered to buy Twitter at a premium.
Spiro did not elaborate on Twitter’s terms, yet the focus of the month-long negotiations has come down to bots, once again. Musk has insisted that Twitter is misrepresenting the number of inauthentic “bot” accounts on the platform. This is also the basis on which he had tried to back out of the purchase earlier.
Legal Intervention
A trial in a Delaware Chancery Court is quickly approaching. In an effort to halt legal action, Musk’s attorneys sent a letter to Twitter on Tuesday, October 4, offering to renew the original offer of $44 billion. However, they made it clear that Musk could still pursue any kind of action he wanted against Twitter.
According to Insider, Twitter was uncomfortable with the ‘slippery language’ pertaining to Musk’s debt financing for the purchase. Moreover, Twitter had also made it clear that for Musk to close the deal at the discounted price of $50 per share, he would have to commit to the purchase fully. This means seeing the takeover take place no matter what stance his banks and other financiers take.
It is to avoid all of these complications, as well as the courtroom trial, that Musk decided to simply follow through with the initial offer made in April, as per sources familiar with the situation.
Where Things Stand Now
Simply put, Twitter no longer has faith in Musk. They are asking for renewed commitments from Elon Musk’s financers. Had these conditions been met, Twitter hoped the deal could be closed by Monday, October 10.
Chancery Court Judge Kathleen McCormick has sided with Musk to halt the case until October 28. This is intended to give both parties additional time to complete the transaction outside the courtroom. If no solution is reached within this time, a trial will take place in November.
After this ruling, Twitter reversed its stance on finalizing the purchase by October 10. It commented, “We look forward to closing the transaction at $54.20 by October 28.”
For now, let’s just say there is potential for the following two weeks to be rather intense and interesting.
Recent Comments