Cue the lawyers’ picnic as Elon Musk continues to try and find room to escape his high-priced bid for Twitter.
Monday saw Musk, through a lawyer’s letter, threaten to abandon his $US44 billion takeover of Twitter because he claims the social media network has failed to provide data on spam and fake accounts.
In the letter to Twitter, Musk’s lawyers repeated the request for details on so-called bot (sham or false) accounts and reserved all rights to terminate the merger claiming the company was in a “clear material breach” of its obligations by not providing him with the information.
He first made the request in mid-May when putting the bid on hold and starting to try and tap dance his way out of the deal.
Twitter shares fell 6% at one stage but recovered to end at $US39.56, down 1.49% for the day. This is still a steep discount to Musk’s offer of $US54.20 a share.
That discount, which has been there in the market since just after Musk revealed his offer in April, continues to suggest that investors do not expect the deal to close at the agreed price.
Shares in Musk’s EV maker, Tesla rose 1.6%.
Twitter rejected musk’s contention, saying in a separate statement:
“Twitter has and will continue to cooperatively share information with Musk to consummate the transaction in accordance with the terms of the merger agreement.”
It said it intends to close the deal at the agreed price and terms, Twitter added.
Musk put the deal “temporarily on hold” in mid-May, saying he will not move forward with the offer until Twitter showed proof that spam bots account for less than 5% of its total users.
Although Musk has extensively used Twitter to air his views on the deal and the company, this is the first time that he has formally threatened to walk away.
The new letter was dismissed by most in the markets as an attempt to wriggle off the hook of making an overpriced takeover.
“It’s fairly obvious that he has buyer’s remorse and he is trying whatever to get a reduction in price, and I think he may succeed,” said Dennis Dick, a proprietary trader at Bright Trading LLC told Reuters.
“You can see the sell-off in social media stocks and he has realised that he overpaid … all these are tactics just to get a reduction in price.”
Musk owns 9.6% of Twitter and the $US54.20 offer is clearly too much, given the slide in share prices generally since April. Twitter shares have never made the $US54.20 level and in fact their most recent high was $US50.98 on April 5 as reports of Musk’s interested firmed up.
As part of the bid, Musk is contractually obligated to pay a $US1 billion break-up fee if he does not complete the deal. Twitter can sue for “specific performance” to force Musk to complete the deal and obtain a settlement from him as a result.
That sounds like lawyers at 10 paces.
