The Elon Musk-Twitter deal is making many experts shake their heads.
According to the Wall Street Journal (WSJ), the lawsuit between Elon Musk and Twitter may be the strangest trial in the history of US corporate mergers. The Tesla founder has made the public as well as Twitter itself spin like a wheel when from trying to convince to buy the social network to trying to shake off the deal.
The arrogant Twitter “she” at first did not want to fall into the hands of “He” Elon Musk, a rich man with a lot of money. But after the fierce attack, it is also happy to nod to the $ 44 billion that experts say is too high because no one wants to spend that much money on a social network flooded with instability.
Then when Twitter’s stock price evaporated 32% from $54.2 per share to $36 per share, Elon Musk began to want to get out of this supposed “wrong buy” deal. Immediately, Twitter filed a lawsuit in court because Elon Musk violated the contract, despite the fact that this social network once did not pay attention to the proposal of the billionaire Tesla.
Elon Musk’s side accused Twitter of falsifying data, giving false information, and making operating moves without the billionaire’s consent but freezing hiring or laying off employees.
The WSJ reported that many legal experts said that Elon Musk’s argument was not strong enough compared to Twitter because the reasons the Tesla founder gave did not explain the damage that caused him to abandon the deal.
Laying off employees or suspending hiring doesn’t actually happen on Twitter alone. Even corporations like Meta (Faebook) or even Tesla itself are having to adjust personnel costs.
The irony here is that even if the lawsuit is won, Twitter can’t force Elon Musk to continue the deal because there is no law that jails a buyer because they don’t want to spend money on something. lose the deposit and some fine.
The WSJ reported that there have been small deals where the court ordered the buyer to fulfill an obligation based on specific terms they had signed. However, there has never been a $44 billion deal where the US Court forced the buyer to complete the contract. Most deals like this will end up through negotiation to reduce the price, or the buyer accepts a penalty.
Historically, there has been a similar situation when the Tiffany brand sued the fashion group LVMH in 2020 for dropping the deposit. As a result, Tiffany agreed to reduce the selling price from $16.2 billion to $15.8 billion to close the deal with LVMH.
With Elon Musk’s case, the contract clearly states that the Tesla founder will have to pay $ 1 billion if the deal fails, a number too small compared to the $220 billion fortune.
Game of catch
At the end of January 2022, Elon Musk bought 22.8 million shares of Twitter and continued to buy in February-March 2022, thereby owning 9% of shares, equivalent to $ 2.6 billion, becoming largest individual shareholder in this social network.
It is worth mentioning that the Tesla founder has advertised his ownership of Twitter with comments on whether to buy or build a new rival social network. By the time the number of shares owned was made public in April 2022, Elon Musk had been secretly negotiating with Twitter for 9 days.
Initially, Elon Musk was said to want to sit on the board, but on April 9, 2022, just hours before Twitter agreed, the Tesla founder decided to withdraw. Just 4 days later, Elon Musk suddenly made an offer to buy Twitter at $54.2 per share, equivalent to $44 billion.
Billionaire Elon Musk’s arrogant attitude made Twitter executives also hot and they also ignored the Tesla founder’s offer. But gradually, this social network is also difficult to resist the $ 44 billion figure because no one is interested and can afford to spend so much money.
Twitter’s nod caused a media explosion as the world’s richest man turned his attention to the social networking business.
However, the story is not over as the share prices of both Twitter and Tesla have gone down due to bad developments from the macroeconomic market. The epidemic situation in China affected Tesla’s Shanghai factory, and then the inflation pressure affecting costs also caused the electric car company’s share price to fall further.
As a reminder, most of Elon Musk’s $44 billion is from the sale or mortgage of Tesla stock. As of May 24, 2022, Tesla’s stock price has lost nearly 50% of its November 2022 peak, causing Elon Musk to evaporate more than $100 billion of his fortune and weakening his ability to raise money for the Twitter deal.
As of now, Tesla’s stock price has evaporated 37% and this means that Elon Musk will have to mortgage more shares if he wants to raise enough money to buy Twitter. Currently, Elon Musk is still the largest individual shareholder of Tesla with 16% of the shares.