As reported on Matzav.com on Friday, billionaire Elon Musk is ending his planned $44 billion deal to purchase Twitter after saying the social media company has failed to provide information about the number of spam and fake accounts on the platform.
“Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information,” Musk’s lawyers said in a filing with the Securities & Exchange Commission.
Market Place reports that some experts think that Musk, who is the CEO of electric vehicle maker Tesla, isn’t so worried about the integrity of that data and is instead dealing with a case of cold feet after Twitter shares plunged amid a shake-up in tech stocks. When Musk announced his offer, Twitter stock stood at $54.20 per share; it closed Friday’s trading session under $37.
Whatever the reason, his reluctance comes with a $1 billion price tag. This is called a breakup fee, a contract provision that’s designed to prevent deals from falling apart.
Market Place explains: Most acquisition agreements have two different breakup fees: a regular breakup fee paid by the seller, or the target, to the buyer (typically paid if the seller gets a better offer), and a reverse breakup fee, the type Musk would have to pay. These are paid by the buyer, explained Afra Afsharipour, a senior associate dean for academic affairs and a professor at the University of California, Davis, School of Law. “It essentially allows the buyer to terminate the deal under certain conditions,” Afsharipour said, adding that she thinks Musk will have a hard time walking away from the deal without paying one.
The argument outlined in the letter sent by Musk’s lawyers in early June is the only valid argument he could make, but it may not stand up in court, Afsharipour said. “Partly because this is not a new thing that he didn’t know anything about. He’s been an active user, he’s been talking about this for a long time,” Afsharipour said. “He explicitly waived doing due diligence on Twitter in connection with a transaction.”
{Matzav.com}
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