Elon Musk has announced that he wants to cancel the $ 44 billion purchase of Twitter about two months after he said the deal was held by Hold due to his questions about fake accounts on the platform.
Twitter “practically violated multiple clauses in the agreement,” according to a letter sent from Musk’s lawyer to the regulator. The Twitter letter also accuses him of “misleading and false representations” in entering into a deal with Musk.
The social network in response announced that it intends to continue with the purchase deal at the agreed share price, $ 54.2, and even noted that it plans to explore legal options regarding the way forward.
Here’s everything you need to know.
Why did Elon Musk announce that he was canceling the purchase deal?
In a letter Musk sent to the regulator on Friday, he noted that Twitter did not provide all the information necessary for him to be able to estimate the rate of spam accounts on the platform. Musk’s lawyers have announced that Twitter has made significant changes to its business without its consent, such as layoffs and a freeze on new hires.
What’s going to happen now in the Twitter deal?
The Twitter board has announced that it will take legal action to enforce the original terms of the deal. Board member Brett Taylor even tweeted that he is confident the company will win the business court.
What is the current share price of Twitter?
The share price of Twitter fell 5.1% on Friday, or $ 1.98, to $ 36.81, after the company announced on Thursday that it would lay off 30% of its employees in the talent recruitment team.
Why were the spam accounts on Twitter a point of disagreement for Elon Musk?
Musk noted that the fake Twitter accounts are a major concern in the company’s business and economic performance, and that he needs clarity on the issue in order to consolidate the financing for the acquisition deal. He tweeted back in May that the deal is in “Hold” due to the data regarding the spam accounts on the platform. In June Musk had already threatened in a letter to the company that he would cancel the deal if Twitter did not provide the information he requested regarding the accounts. He added that the deal would not go ahead if he did not see the data that would allow him to evaluate Twitter’s claims regarding Pike.
There are many allegations that Musk used the issue of counterfeit accounts as a bargaining option or even an option to exit the purchase transaction, due to his awareness of the issue long before he agreed to purchase Twitter and even waived due diligence before signing the draft contract.
Twitter has long estimated that the rate of online pikes represents less than 5% of the daily active users that can be profited from, whose number on the network now is 229 million, according to the company. However, Elon Musk noted that in his opinion the rate is approaching 20%. Twitter has provided Musk with the full “shutdown” of tweets on the network, but data experts point out that their analysis is not simple at all.
Musk, as one of the users of the highest profile on Twitter, is particularly vulnerable to spam on the platform, according to researchers in the field.
A letter from Musk’s lawyer stated that “Twitter ignored Musk’s requests, sometimes she rejected them for reasons that seemed unjustified, and sometimes she claimed she would cooperate but provided Mr Musk with incomplete or unusable information.”
What are the economic risks at the center of the deal?
Elon Musk agreed to buy Twitter last April for $ 44 billion, or $ 54.2 per share. He noted at the time that he did not care if he did not benefit from the deal: “To have a public platform that is maximally assured and cooperative is very important for the future of civilization. I do not care about the economy at all.”
Musk sold more than $ 8 billion in Tesla shares to finance part of the acquisition. Tesla shares rose more than 2% in late Wall Street trading following Musk’s announcement of the explosion in the purchase deal, which has angered some of the billionaire’s fans.
Other potential losers in the deal are the financial institutions interested in continuing. Twitter’s bankers will earn tens of millions of dollars in consulting fees in closing the deal. The Goldman Sachs group was expected to earn about $ 80 million, including $ 15 million in down payment, while JP. Morgan Chase was able to rake in $ 53 million, 5 million of them in advance.
Why was Elon Musk interested in the deal?
Musk called Twitter “de facto city square” and said he wanted to purchase the platform because he thought it was important to have an “exclusive arena for freedom of expression”. Musk, who has more than 100 million followers on Twitter, hinted that he was looking to make significant changes to the social networking site, including softening content monitoring and supporting an edit button for tweets – a function the company is already trying to develop itself. He also said he would try to eliminate the bots phenomenon, rely less on advertising and allow for encrypted and encrypted messages. Musk even announced in interviews that he plans to turn Twitter into a private company, which would have made it easier for him to make changes without pressure from shareholders.