June 25, 2022

Elon Musk declares Twitter acquisition ‘temporarily on hold’

Billionaire entrepreneur Elon Musk shocked the public early Friday morning when he indicated via Twitter post that his previously announced deal to acquire the social media platform was “temporarily on hold,” as the Wall Street Journal reports.

The move, Musk explained, was made as he awaits further details “supporting calculation that spam/fake accounts do indeed represent less than 5%” of Twitter’s current users, as the company itself represented in a filing earlier in the week, according to Reuters.

Musk’s tweet sent Twitter shares plummeting in early market trading, as Breitbart noted, declining by more than 15%, perhaps prompting a subsequent post from the mercurial Tesla CEO assuring everyone that he was “[s]till committed to acquisition.”

CNBC explained that if Musk were to abandon the deal in its entirety, he would face the threat of a breach of contract lawsuit from Twitter that could ultimately cost him billions, and the fact that the parties entered into a $1 billion “reverse termination” fee agreement last month would not shield the him from such litigation.

A fee of that nature, the outlet noted, would permit Musk to walk away from the deal in the event of an intervening outside event that stood in the way of the transaction, such as regulatory actions or third-party financing issues. The discovery of material fraud could also trigger the use of such an agreement, but a stock sell-off alone would likely not suffice.

As such, some observers have suggested that Musk’s declared hold on the deal is simply a gambit designed to achieve a lower price for the company, with Bernstein research analyst Toni Sacconaghi telling CNBC, “This is probably a negotiation tactic on behalf of Elon.”

“The market has come down a lot. He’s probably using the guise of true active users as a negotiation ploy,” Sacconaghi added.

Indeed, as Breitbart noted, investment firm Hindenburg Research recently opined that Musk already has sufficient leverage to secure a lower price by threatening to abandon the deal, stating in a report that if his “bid for Twitter disappeared tomorrow, Twitter’s equity would fall by 50% from current levels. Consequently, we see a significant risk that the deal gets repriced lower.”

Current Twitter CEO Parag Agrawal responded in the wake of Musk’s Friday tweets, saying, “I expect the deal to close,” though under precisely what terms that might happen is something that still remains to be seen.

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