HomeTech NewsMusk's Twitter acquisition can cause "$1 Billion Fee"

Musk’s Twitter acquisition can cause “$1 Billion Fee”

Elon Musk, the founder and CEO of electric car maker Tesla, announced on the 13th that the Twitter acquisition will be put on hold until more social media information on how many fake spam and bot accounts are out there. 

Afterwards, Twitter’s stock price plummeted 18% in pre-market trading and closed down 8% on the day. Musk later emphasized that the acquisition will continue, but if Musk fails to acquire Twitter, he must still pay Twitter a $1 billion “breakup fee”. But will $1 billion clear Musk’s responsibilities? Media believes that it is not so simple.

After Musk and Twitter reached an acquisition agreement at the end of April, the agreement was that if the acquisition did not succeed, Musk must pay $1 billion in termination compensation to Twitter. 

Some market analysts and lawyers believe that even if Musk pays $1 billion in termination compensation, it will not be completely relieved of related responsibilities, and may even cause the world’s richest people to face billions of dollars in compensation.

The report quoted senior market analysts as saying that the fall in U.S. stocks has significantly reduced Twitter’s market value by about $9 billion, which is far from the $44 billion offered by Musk, but the decline in market value cannot be a reason to abandon the acquisition of Twitter. 

Buyers who abandon an acquisition without a valid reason will no longer be able to get out by paying termination compensation and could face billions of dollars in damages lawsuits. It happened when the French fashion brand Tiffany was acquired by LVMH Group in 2020. LVMH Group planned to give up the acquisition and face litigation. Finally, Tiffany reconciled after reducing the acquisition amount from US$16.2 billion to US$15.8 billion.

Musk may also have to face lawsuits from Twitter shareholders

Musk’s consideration of abandoning the acquisition of Twitter should be similar. Twitter’s stock price fell more than 8% on the 13th, and was about 23% lower than the price of Musk’s acquisition of $54.20 per share in April. Part of the fall in Twitter shares has to do with the overall decline in U.S. tech stocks in May, but Musk may still think the acquisition was overpriced. In particular, Tesla’s stock price fell 24% from when it reached an acquisition agreement with Twitter last month. For Musk, the world’s richest man, to buy Twitter at the original price, although he emphasized that the merger will continue, is full of pressure.

If Musk doesn’t want to close the deal, paying $1 billion in termination compensation is the best outcome. Termination payments worth more than $1 billion following recent Twitter and Tesla stock drops, but that may not be the case, as Musk may also have to face lawsuits from Twitter shareholders for sabotaging the deal, plus personal and Tesla Reputational damage, etc., is not something that $1 billion in termination compensation can solve.

Musk’s acquisition of Twitter If Tiffany and LVMH reconcile, Twitter re-negotiates with Musk on mergers and acquisitions, the more likely result is to accept Musk’s acquisition at a lower price, otherwise there will be no better price. In the face of a potentially protracted and time-consuming lawsuit, Twitter has completed preparations. In addition to dismissing two senior management, it also announced the suspension of recruitment.

(Image Source: Unsplash)

Mehmet S. Kaya
Mehmet S. Kayahttps://teknonel.com
Mehmet is one of the administrator of Teknonel. As a software developer, he loves to share his knowledge in related topics. He is highly familiar with the editorial process from the inception of an article idea, through the iterative process, publishing, and performance analysis as well as product reviews.

Follow us on Social Media!


Related Articles

Microsoft rumored to be investing $10 billion in OpenAI

According to comprehensive foreign media reports, Microsoft intends to invest $10 billion in ChatGPT developer OpenAI, which will make OpenAI’s valuation reach $29 billion.The...

New VR Gear “Aroma Shooter” allows you to smell Games and Videos

With the gradual increase of VR reality games, in order to pursue a better sense of presence, Japanese game manufacturer Aromajoin released the Aroma...

iKnife: This smart scalpel detects tumors almost instantly

Facilitating the diagnosis of cancers thanks to an intelligent scalpel, this is the promise of iKnife! This device, developed by Imperial College London, can...

Acer’s new Bike Desk allows exercising while working in office

Do New Year's resolutions balance work performance and personal health? In addition to using time to exercise after get off work, Acer's newly released...

Explore More Articles

The night sky is full of black holes instead of stars

The night sky is full of black holes instead of stars

This is a seemingly ordinary starry sky photo (see the first picture), but it is a more special celestial body than luminous stars, that...
What are the Differences between quail eggs and chicken eggs

What are the Differences between quail eggs and chicken eggs?

Quail eggs and chicken eggs have several differences in terms of size, nutritional content, taste, and culinary uses. Here are some of the key...

Sons of the Forest: How to Craft a Bone Armor?

Armor is surprisingly important in Sons of the Forest . If you plan on delving into the spooky caves that dot this new island, you'll want to...
Gene customizing and cloning business become more Popular

Gene customizing and cloning business becomes more Popular

Replicating beauty pageant camels, replicating equestrian racing horses, replicating high-yielding super cows... With the gradual popularization of animal replication technology, people can use technology...