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Musk’s Twitter Retreat Makes Waves

Plus500 | Wednesday 13 July 2022

Much ink has been spilled in recent months in journalistic outlets across the globe relating to Tesla (TSLA) founder Elon Musk’s attempt to take over Twitter. While Twitter (TWTR) employees and users alike have been far from shy in expressing concern regarding the repercussions of such a deal, it seems that, for the moment, these fears have been allayed. Last week, the world’s richest man declared his intention to back out of the acquisition agreement, setting the stage for an unprecedented legal battle that could shake up the American tech industry.


Deal Makes Waves

Musk and the residents of Twitter’s executive suite made waves across the cybersphere this April when it was revealed that the multibillionaire was set to take Twitter private for the fine sum of $44 billion. Musk, an avid user of the platform, has often tweeted out information regarding his pioneering electric vehicle firm’s business strategy which has affected share values. While these micromessages have already drawn the attention of Securities and Exchange Commission regulators over the years, the current difference of views between Musk and Twitter could land him in even hotter water.

While the microblogging platform has appeared ready and willing to move forward with the deal at every stage of the process, Musk first raised the issue of so-called ‘spam accounts’ a mere month after news of the deal was first released to the public. In May, the Tesla CEO announced that the deal was ‘on hold’ due to Twitter’s supposedly falsely-inflated user numbers, although a legal provision for such a pause does not exist in the relevant jurisdiction.

The crux of the issue is Musk’s contention that Twitter’s top heads are intentionally concealing the true extent of the fake account issue on the social media platform and thereby misleading him. Twitter maintains that no more than one in twenty of the accounts are facades, but Elon Musk believes the issue could be up to four times larger. Because of this, he seems to be unwilling to follow through with the $54.20-per-share deal as agreed upon this spring.

Cold Feet After Signing?

The two parties seem to be gearing up for a protracted battle in the courts of Delaware, on the United States’ east coast. It’s only been less than a week since Musk made it clear to all that he is no longer interested in bringing Twitter into his business empire, but executives of the latter will pull out all the stops to push the deal through.

While the original deal inked three months ago includes a $1 billion breakup clause to be paid by Musk in the event that the agreement falls through, Twitter is suing in Delaware’s Court of Chancery to force Musk to acquire the platform completely.

This lawsuit has as its basis a further clause in the contract between the two parties, allowing Twitter to use legal means to push the deal through as long as the debt acquired by Musk to complete the purchase is still at his disposal. All in all, it remains to be seen how all things will play out in the courtroom.

From Silicon Valley to Wall Street

Much as has been observed with regard to Tesla shares, Elon Musk’s comments on one of the internet’s most popular public forums could have been influencing the dispositions of traders toward Twitter stock

Since the deal was first announced in April, Twitter shares have decreased nearly 30% in value. While a general market retreat, especially pointed when it comes to the U.S. tech industry, has been noted throughout 2022, Twitter execs contend that Musk’s open disparaging of the firm’s management is the culprit for this drop. 

At the moment, it’s still unclear whether U.S. courts will side with Twitter and force Musk’s hand with regard to the controversial deal. Traders will have to wait and see how all this could play out with regard to shares of the social media giant going forward.

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