The uncertainty around the Twitter Inc. deal has intensified ever since Elon Musk announced on the company’s namesake platform that the deal had been put on hold.
What Happened
Musk negotiated the agreement with several seller-friendly features and the most notable is one legally called “special performance,” the Journal noted. This vests Twitter with the right to ask a court to “force” Musk into honoring his commitment to buy the company.The report noted precedence with French fashion retailer LVMH. After LVMH tried to wiggle out of a previously-agreed deal to buy U.S. jewelry retailer Tiffany, the latter sued the former in a U.S. court. The deal finally went through at a lower price.
Musk Cornered?
Musk has a tall order before him. He can walk away from the deal if lenders go back on their commitments. This scenario is less likely because he has lined up credible lenders, who have given commitments to partially finance the transaction.A second option is a regulatory roadblock for the deal to go through.
There is a third option before Musk, which is more in his control. He has to prove there was a material change in Twitter’s business, the report noted, citing veteran litigator Allan Diamond.
“I think Musk has got some real problems,” Diamond said.
Going by Twitter’s proxy filing on Tuesday, Musk, in a hurry to get the deal done, did not ask for detailed due diligence. The spam account estimate over which Musk has temporarily stalled the deal isn’t newly-disclosed information. The Journal noted that Twitter has been reporting this statistic for years in its regulatory filings.
Musk may now be left with no option but to complete the transaction at the $44 billion or $54.20-per-share price he committed to at the time of the agreement.
