Can Elon Musk really walk away from $44bn Twitter takeover?
Elon Musk notified Twitter on Friday that he was walking away from an agreed $44bn (£36.6bn) takeover. The move sets the stage for a legal battle between the world’s richest man and the social media platform. Here we explain what happens next, and whether Musk has a chance of succeeding.
The core of Musk’s case centres on his belief that the number of spam bot accounts on Twitter’s platform is much higher than the company’s assertion of fewer than 5% of its daily active users.
The letter from lawyers for Musk, whose shares in his electric car business, Tesla, were going to help fund the deal, argues that under-representing the number of spam accounts on the platform – something Twitter denies – constitutes a “company material adverse effect”, which effectively means something is seriously wrong at the business and it is worth nowhere near the $54.20 a share agreed on.
The merger agreement contains a clause (6.4) stating that Twitter must provide Musk with all data and information that the multibillionaire requests “for any reasonable business purpose related to the consummation of the transaction”. This is a covenant in the deal – a promise to act in a certain way during the sale process – and a breach of it would allow Musk to walk away without sanction.
But legal experts have questioned whether failure to provide more than has already been shared by Twitter regarding its bot count would breach the covenant. The agreement uses the word “reasonable” a lot when laying out what information requests are acceptable.
“The agreement doesn’t give him the right to receive any information, for any reason,” said Brian Quinn, an associate professor at Boston College law school. “He is going to bear a burden of proving to the court that
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