Twitter: Elon Musk terminates deal

Elon Musk has announced to take down his USD 44 billion bid to buy microblogging platform Twitter.

Highlights

• Elon Musk is terminating the agreement because, Twitter was involved in material breach of the agreement signed between both. Twitter had put forward false and misleading statements while negotiating the agreement.
• On the other hand, Twitter has planned to start a legal action to enforce the agreement.

Why Elon Musk terminated the deal?

According to Elon Musk, the microblogging site did not provide him the necessary information regarding the prevalence of fake or spam accounts on twitter platform. This concern was first started in May 2022. In May, the deal was temporarily put on hold, until he received data from Twitter regarding the no of spam and bot accounts. Data revealed that, number of spam and bot accounts accounted for 5 per cent of its total users.  Furthermore, Twitter recently fired senior executives and one third of the talent acquisition team. This was another reason for the termination.

Other external reasons for Musk’s decision

• Tech stocks have been witnessing a huge downfall, ever since this deal was announced. Before Elon Musk’s decision to terminate the deal, value of Twitter’s stock on New York Stock Exchange was USD 36.81, as compared to USD 51.70 on April 25, 2022. Its stock has declined by 29%. Tesla’s stock price has also reduced by over 24 per cent since both the entities inked the deal.
• Second reason revolves around how Elon Musk would finance the USD 44 billion deal. Musk announced in May that, USD 33.5 billion was to be paid in equity, as opposed to earlier commitment of USD 27.25 billion. Thus, it is likely that, Musk has not managed to raise sufficient money to finance this deal.

Background

Musk began buying Twitter’s shares in January 2022. His shareholding increased from 5% in March to 9.2% in April. Thus, he became the largest individual stakeholder in the company. Musk offered to buy Twitter for USD 44 billion, on April 14, which Twitter accepted on April 25.

Month: Current Affairs - July, 2022