The outcome of the bizarre operation to buy Twitter by Elon Musk will still have to wait. The two parties have not been able to reach an agreement even after the proposal of the tycoon born in Pretoria (South Africa) to resume the operation at the original price of 44,000 million dollars. There are important fringes and since Twitter no longer trusts the billionaire, it does not want to leave loose ends. Even so, Musk has asked the judge to suspend the process and, despite the opposition of the social network, it has agreed. It gives the parties three weeks, until October 28, to close the operation. If not, there will be a trial in September.
The condition related to financing and the desire of Twitter managers to shield themselves from future lawsuits is what separates the parties. The normal thing is that an agreement is reached, but another script twist is not ruled out either, after everything seen.
In the letter in which the 51-year-old businessman appeared to surrender, it was stated: “We are writing to notify you that Musk and his partners intend to proceed to the closing of the transaction contemplated in the merger agreement on April 25, 2022, under the terms and subject to the conditions established therein and pending receipt of the debt financing funds contemplated therein (…)”.
The proposal, therefore, seems somewhat conditional on the financing of the operation. Since Musk is apparently paying an above-market price, there may be some issues trying to raise the funds, and it’s a condition beyond the company’s control. What happens if Musk doesn’t really try to get the funding and alleges it to break again? Twitter doesn’t want to leave an open door for Musk to try to escape from his obligations again.
Another point of contention, as revealed by financial media, is that Twitter wants to achieve guarantees that all litigation will be closed with the agreement. He does not want Musk to take over the company, fire the current managers and, from within, sue them for fraud, for example.
The social network had sued Musk to force him to comply with the purchase agreement and the proceedings of the process were progressing. The countdown to the trial was nearing its end. It was scheduled for October 17 and before that Musk himself and the CEO of Twitter Parag Agrawal had to give a statement. Since an agreement was not reached, Musk’s lawyers have asked the judge to temporarily suspend the process. Those of Twitter have opposed it, because having the process under way was a form of pressure for them (and, again, because they do not trust Musk).
The Delaware equity judge handling the case has decided to grant the stay, albeit for a short time. She gives until October 28 for the operation to close. If not, she will set the trial for November. Until now, the judge has resisted Musk’s attempts to delay the process and postpone the trial, but this time she must think that there is a clear opportunity for the agreement.
stock market crash
Investors are also wary of Musk. Twitter shares have fallen 3.7% on Thursday and are trading at $49.39. The employer’s offer is $54.20. That leaves a margin of supposed easy profit in the short term close to 10% if the operation goes well. But what if it doesn’t come out?
After signing the purchase agreement in mid-April, Musk tried to back down. The tycoon sent a letter on July 8 saying that he was breaking the purchase agreement because Twitter had too many fake user accounts, despite the fact that he had always said that he was buying the social network, among other things, to clean it of spam, so it seemed more like an excuse to get out of the deal in the face of worsening market conditions. Twitter sued him to enforce the agreement. The lawsuit was forceful and the response from Musk’s lawyers was not very convincing.
With the case already open in a Delaware court, upon learning of a complaint from Peiter Zatko, the social network’s former head of security, Musk sent a second breakup letter in late August saying that the former executive’s revelations showed a breach of the merger agreements. And he still sent a third termination letter upon learning of the $7.75 million severance pay that Zatko himself received.
Since the trial did not look too good for him, Musk’s lawyers tried to reach an agreement with a price reduction. Twitter was shut down. So the tycoon capitulated, at least apparently, and returned to the original proposal. In the essential there is agreement, but the fine print still resists.
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