Days after billionaire Tesla CEO Elon Musk sought to pull out of the $44-billion Twitter takeover deal, the microblogging site hit back on Monday by saying that it had not breached its obligations under the merger agreement as indicated by him. Elon Musk had last week in a regulatory filing with the US Security and Exchange Commission said that Twitter did not provide him enough information on fake accounts on the platform, adding that the company was breaching “multiple provisions of the agreement”. As a result, shares of Twitter slid more than 9 per cent on Monday.
In this scenario, the world’s richest person and the social media company are bracing for a legal battle, with Twitter vowing to challenge Musk in court to uphold the agreement. But what is next for both the parties? Here is what we know.
Why Does Elon Musk Want to Drop the Twitter Deal?
In the regulatory filing dated Friday, July 8, Musk’s lawyers said that Twitter has failed to provide enough information about the number of fake accounts it has.
“The Merger Agreement requires Twitter to provide Mr. Musk and his advisors all data and information that Mr. Musk requests “for any reasonable business purpose related to the consummation of the transaction,” Twitter has not complied with its contractual obligations,” stated the letter.
However, Twitter has stood on its ground by repeatedly saying that it had provided the data to Musk. Last month, it said that a firehose of public raw data on hundreds of millions of daily tweets was made available to Musk. The company said that it believed there were about 5 per cent bot accounts on the platform, but Musk claimed that it was way more. But on Monday Musk continued to taunt the company, using Twitter, over what he has described as a lack of data.
How did Twitter React?
Twitter did not seem to be giving up so soon with the company’s chairman Bret Taylor taking to the microblogging platform to announce that it was taking legal action against Musk to enforce the deal.
“The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery,” said Taylor in a tweet dated July 9. A day after, it was also reported that Twitter had hired a legal team to fight against Musk at the court, a news that the billionaire laughed off.
The company could have pushed for a $1 billion breakup fee that Musk agreed to pay under these circumstances. Instead, it looks ready to fight to complete the purchase, which the company’s board has approved and CEO Parag Agrawal has insisted he wants to consummate.
Who Will Emerge As Winner?
While it is impossible to predict the winner of a legal battle, experts quoted by Associated Press said that Twitter had the stronger case in this matter. “Morningstar analyst Ali Mogharabi noted that Twitter has described its estimate of fake and spam accounts for years in regulatory filings while explicitly noting that the number might not be accurate given the use of data samples and interpretation,” AP said in a report.
On the layoffs and hiring freeze at the company, Twitter can argue that market conditions had made the firm do so — thereby not attributing the matter as a result of Musk’s intervention at the company.
As per the analysts, the case may also end at a settlement, with both the sides agreeing on a lower price. However, there is also a point where Musk may have to pay the $1 billion break up fee.
(With inputs from AP)
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