In April 2022, Elon Musk signed a deal to buy Twitter for 44 billion dollars. Now, however, Musk wants to pull out which is proving difficult due to Twitter’s resolve.
Twitter claims that by signing a deal with Musk, it is evident that he must take all necessary steps to complete the project. Legal experts claim that the banks that agreed to lend Musk billions of dollars to help him purchase Twitter signed contracts prohibiting them from just walking away if they change their minds.
Musk wants out because of Twitter’s failure to provide him with additional information on the average percent of daily Twitter users, or the percentage of spam accounts and robots on Twitter and what he perceives as the company’s deteriorating commercial. Twitter is suing him to finalize the agreement, claiming that his justifications for quitting are just pretexts for breaking a financial agreement he no longer wants to respect. Meanwhile, his financial backers remain helpless.
The Bloomberg Billionaire Index values Musk as the richest person in the world at $218 billion, but even he doesn’t have $44 billion in cold, hard cash stashed under his mattress. To borrow a total of $25.5 billion, he made two agreements with banks like Morgan Stanley, Bank of America, and Barclays. He pledged a sizeable portion of his own wealth in the form of Tesla shares as security in case he was unable to repay the loans. The calculus for the banks that agreed to lend to Musk may be altering now that Musk claims he is abandoning the agreement.
According to M. Todd Henderson, a professor at the University of Chicago Law School, “Musk doesn’t want to own Twitter, the banks don’t want to fund it. We’re in this weird ‘Alice in Wonderland’ situation trying to force this guy to buy a company he doesn’t want to buy.
Would you want to fund a guy to own a company that he doesn’t want to own?”
The banks are only obligated to fund the transaction if it closes, and many people doubt Twitter will be successful in forcing Musk’s hand. A more likely outcome is that the judge in Delaware Chancery Court, where the trial will be held, will force a compromise, ordering Musk to pay Twitter a hefty fee for causing so much trouble, but allowing him to walk away in the end.
The primary responsibility of the Twitter board is to serve its shareholders, who include banks, pension funds, hedge funds, and people who own stock in the company. Twitter shares are currently selling at roughly $36, a lot less than the $54 per share Musk has committed to pay those owners to buy the company. If Twitter’s board allowed Musk to resign, it would be throwing money away and risking shareholder litigation.
Twitter claims that by signing a deal with Musk, it is evident that he must take all necessary steps to complete the project. Legal experts claim that the banks that agreed to lend Musk billions of dollars to help him purchase Twitter signed contracts prohibiting them from just walking away if they change their minds.
Musk wants out because of Twitter’s failure to provide him with additional information on the average percent of daily Twitter users, or the percentage of spam accounts and robots on Twitter and what he perceives as the company’s deteriorating commercial. Twitter is suing him to finalize the agreement, claiming that his justifications for quitting are just pretexts for breaking a financial agreement he no longer wants to respect. Meanwhile, his financial backers remain helpless.
The Bloomberg Billionaire Index values Musk as the richest person in the world at $218 billion, but even he doesn’t have $44 billion in cold, hard cash stashed under his mattress. To borrow a total of $25.5 billion, he made two agreements with banks like Morgan Stanley, Bank of America, and Barclays. He pledged a sizeable portion of his own wealth in the form of Tesla shares as security in case he was unable to repay the loans. The calculus for the banks that agreed to lend to Musk may be altering now that Musk claims he is abandoning the agreement.
According to M. Todd Henderson, a professor at the University of Chicago Law School, “Musk doesn’t want to own Twitter, the banks don’t want to fund it. We’re in this weird ‘Alice in Wonderland’ situation trying to force this guy to buy a company he doesn’t want to buy.
Would you want to fund a guy to own a company that he doesn’t want to own?”
The banks are only obligated to fund the transaction if it closes, and many people doubt Twitter will be successful in forcing Musk’s hand. A more likely outcome is that the judge in Delaware Chancery Court, where the trial will be held, will force a compromise, ordering Musk to pay Twitter a hefty fee for causing so much trouble, but allowing him to walk away in the end.
The primary responsibility of the Twitter board is to serve its shareholders, who include banks, pension funds, hedge funds, and people who own stock in the company. Twitter shares are currently selling at roughly $36, a lot less than the $54 per share Musk has committed to pay those owners to buy the company. If Twitter’s board allowed Musk to resign, it would be throwing money away and risking shareholder litigation.
