Elon Musk Can’t Get Away From Twitter Deal With $1 Billion Breakup Fees


Musk’s plans to acquire Twitter have worried policymakers around the world.

Joe Skipper | Reuters

Elon Musk can’t just walk away from a deal to take over Twitter by paying the agreed $1 billion dismantling fee. It’s not that simple.

Musk Friday tweeted that he had decided to “hold” the Twitter takeover while investigating whether the volume of fake/spam accounts is actually only 5%, as the company has long claimed.

He followed the tweet over and over again that he was still committed to the acquisition.

But he risks being sued by Twitter for breach of contract that could cost the richest man in the world billions of dollars.

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Musk and investors may want a better deal

Musk’s logic for holding the deal could be similar. He may want Twitter to lower the selling price. Twitter shares were down more than 8% on Friday, down about 23% from the $54.20 per share agreed upon by Musk. Part of the decline has to do with the overall decline in tech stocks this month. The Nasdaq is down an additional 11% since the April 25 close. The day Twitter accepted Musk’s offer.

“It’s probably a negotiating tactic on behalf of Elon,” Bernstein’s chief research analyst Tony Sakonagi told CNBC’s Squawk Box. “The market has gone down a lot. He’s probably using the guise of a real active user as a negotiating maneuver.”

Musk may feel pressured or obligated to lower prices on other potential investors on Twitter, even if the richest person in the world is price indifferent.

musk Discussing with external investors For both stock and preferred financing to reduce my personal stake on Twitter. If he can get a lower price on Twitter, the outside investor’s returns could be higher When Twitter returns to public It is owned or resold.

Why he was still able to try gems

Musk has said he’s still committed to buying on Twitter, but Musk could be tempted to throw a towel at him given the documentary losses related to his account. Tesla Equity Ownership. Tesla’s stock has fallen about 24% over the past month.

If Musk believes that his Tesla losses are related to the Twitter takeover and are large enough to potentially outweigh both the $1 billion cancellation fee and the additional damages he will be claiming in court if he loses, he may decide it makes sense to leave.

But he also had to deal with the reputational damage associated with breaking deals. It is unclear whether any future company would be at risk of selling to Musk for its performance.

Musk could not comment immediately.

Twitter needs renegotiation

As Tiffany and LVMH eventually agreed, Twitter may not have many good options outside of renegotiating with Musk. Companies will want to avoid costly, long-term litigation. Because the company doesn’t have a clear future plan, employees can get away with it. Twitter is already cutting costs. On Thursday it said it was laying off two executives and putting employment on hold.

When Twitter agreed to sell itself to Musk for $54.20, the board didn’t ask for a higher price. Partly because there were no other interested buyers at that price. The Twitter board has come to the conclusion this year that it won’t return to a higher level of trading anytime soon, given the declining valuations of peers like Facebook and Snap.

Twitter’s best bet might be accepting Musk’s lower offer.

A Twitter spokesperson was not immediately available to comment.

WATCH: Elon Musk said he was “still committed” to the Twitter takeover.

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