EIt’s strange: Twitter initially resisted being taken over by Elon Musk. Around two and a half months after the sale was finally agreed at a price of 44 billion dollars, the situation is reversed: Twitter is clinging to the agreement, Musk wants it to burst. After weeks of signaling that his interest in the takeover was waning, the world’s richest person has now officially announced that he intends to back down. Twitter could have thought of something like this beforehand. Where Musk is, there is chaos.
Of course, Musk won’t get off that easily. He has sent word through his lawyers that he is repealing the merger agreement, arguing that he will unilaterally draw a line under it. The fact is, however, that both sides have signed a binding purchase agreement. Twitter immediately announced its determination to go to court and force Musk to complete the acquisition at the negotiated price.
Musk has to prove breach of contract
In principle, Twitter does not hold a bad hand in a legal dispute. Musk accuses the company of breaching its contract, saying the number of “spam” or “fake” accounts may be far higher than it admits. Twitter rejects this. The bar for Musk to use this argument in court as the basis for terminating the purchase agreement is very high. Even the $1 billion contractual penalty negotiated in the agreement for whoever causes the transaction to fail does not simply allow Musk to buy his freedom, as it only applies under certain conditions.
Of course, a legal battle could drag on, and that wouldn’t be in Twitter’s interest. The online platform has enough difficulties, regardless of the posse surrounding Musk. For years she has not understood how to exploit her potential, and the economic environment has recently clouded over considerably, especially in her industry. A continuing stalemate about their future would hang like an additional dark cloud over their business. Ending uncertainty is more urgent for Twitter than for Musk.
Price reduction conceivable
In this respect, Musk has a bit of the upper hand, contract or not. And even if Twitter believes it is in a good legal position to force the acquisition on the original terms, it could be in the company’s interest to renegotiate with it again and agree to a lower price. It is quite possible that Musk is pursuing this goal in the first place and that his retreat is a negotiation tactic.
Whatever the calculus, the model entrepreneur cannot avoid an unflattering insight: he has agreed to a takeover that very quickly turned out to be completely overpriced.
