Musk cancels $44 billion deal Twitter says it will sue

Musk cancels $44 billion deal Twitter says it will sue: Elon Musk, the CEO of Tesla and the wealthiest man in the world, said on Friday that he was canceling his $44 billion (approximately Rs. 3,49,060 crore) bid to acquire Twitter because the social media business had broken many merger agreement clauses.

Bret Taylor, the chairman of Twitter, said on the microblogging site. That the board intended to file a lawsuit to enforce the merger deal.

The Twitter Board is dedicated to completing the transaction under the terms and conditions set out in the agreement with Mr. Musk, he wrote.

Musk’s attorneys said in a document that Twitter has ignored. Or refused to reply to several requests for information on phony or spam accounts on the site. Which is essential to the firm’s operation.

According to the complaint, Twitter “appears to have made false and misleading claims upon which Mr. Musk relied when entering into the Merger Agreement” and is in “material violation of several sections of that Agreement.”

Musk said that he was leaving Twitter because the company had violated its responsibility to “preserve substantially intact the material components of its present business organization” by firing high-ranking executives and one-third of the talent acquisition team.

Due to Musk’s decision, the 16-year-old San Francisco-based business and the billionaire are expected to engage in a lengthy court battle.

Instead of a judge directing a transaction to be completed, contested mergers and acquisitions brought before Delaware courts often result in the corporations renegotiating agreements or the acquirer paying the target a settlement to withdraw.

This is because the target firms are often eager to end the uncertainty around their future and move forward.

According to a source familiar with the situation. Twitter is hopeful that court procedures will begin in a few weeks and conclude in a few months.

Renegotiations of deals have happened before. For example, when the COVID-19 pandemic emerged in 2020 and sent a shockwave across the world economy. Some firms re-priced agreed-upon acquisitions previously.

Musk cancels $44 billion deal Twitter says it will sue

A contract with Tiffany & Co. was once challenged by the French retailer LVMH. As a result, the US jewelry retailer agreed to reduce the purchase price to $15.8 billion by $425 million (or around Rs. 3,370 crores) (roughly Rs. 1,25,350 crore).

According to Ann Lipton, assistant dean for faculty research at Tulane Law School, “I’d think Twitter well-position legally to claim. That it gave him all the essential information, and this is a pretext to searching for any reason. But, first, to get out of the arrangement.”

In extended trading, Twitter shares were down 6% at $34.58 (around Rs. 2,700). That is 36% less than the $54.20 per share Musk agreed to purchase Twitter for in April (approximately Rs. 4,300).

After Musk purchased stock in the firm in early April. Twitter’s shares rose, protecting it from a severe stock market sell-off that battered rival social media companies.

But when he decided to purchase Twitter on April 25. The price quickly declined as investors worried Musk might return from the agreement. After the bell on Friday, Twitter’s stock price fell to its lowest level since March.

The revelation adds another chapter to the will-he-won’t-he tale that began when Musk agreed to acquire Twitter in April. But postponed the transaction unless the social media firm demonstrated that spam bots make up fewer than 5% of its overall user base.

Musk require under the contract to pay Twitter $1 billion (approximately Rs. 7,900 crore) as a breakup fee if he cannot close the transaction due to events like the failure of the purchase finance or opposition from authorities.

However, if Musk decides to end the agreement alone, the breakup fee would not charge.

On Friday, several workers seemed to be commenting on the divorce by sharing memes on Twitter, including images of a rollercoaster and a baby yelling into a phone.

Many employees have voiced doubt about Musk’s promises to relax content control. Because they are concerned about what the merger would imply for their employment, salary, and ability to work remotely.

When concerns about rising interest rates and a possible recession have battered Wall Street. Musk’s decision to back out of the agreement and Twitter’s pledge to fight tenaciously to finish. It placed a shadow of doubt over the company’s future and stock price.

Alphabet, Meta Platforms, Snap, and Pinterest, competitors in online advertising, have had their stock prices fall an average of 45 percent in 2022. Still, Twitter has seen its share price fall only 15 percent during the same period. Which help recently by the Musk acquisition.

Wedbush analyst Daniel Ives said Musk’s filing was negative news for Twitter.

In a letter to clients, he said this was “a catastrophe scenario for Twitter and its Board. As the business would fight Musk in an extended legal battle to recuperate the transaction and the breakup fee of $1 billion (approximately Rs. 7,900 crores) at a minimum.”