Posted10 July 2022, 12:24
The boss of Tesla and SpaceX officially breaks his proposal. A long and perilous legal battle is looming. “It’s ending like a circus.”
Elon Musk, the boss of Tesla and SpaceX, told Twitter on Friday that he was ending the agreement reached with the board of directors to buy the social network because of “false and misleading” information about the company. .
In a letter published by the American financial policeman, his lawyers assure that Twitter has not respected its commitments made in the agreement, by not giving all the information requested on the number of fake accounts and spam.
Long legal battle ahead
Twitter now faces a legal battle that the board of directors has every chance of winning, but from which the company will not emerge unscathed. “It’s one of the craziest business deals I’ve ever seen. From the start it looks like a circus show, and it’s ending like a circus,” reacted analyst Dan Ives of Wedbush.
The agreement reached in April indicated a buyout at a price of $54.20 per share, or $44 billion in total. But this kind of contract is “designed to prevent buyers from panicking and deciding to walk away,” said Ann Lipton, a law professor at Tulane University.
The boss of Tesla and SpaceX presents several arguments: the board of directors (CA) would have minimized the number of inauthentic accounts active on the platform, and would not have provided him with all the information necessary to correctly assess the spam problem. Elon Musk’s lawyers also refer to recent dismissals of Twitter employees and the hiring freeze, which they believe violates the company’s obligation to continue to operate normally.
“Insufficient” reasons
These are not sufficient reasons, believes the specialist in business law. “Musk is looking for the little beast in the agreement. But for “false declarations”, for example, it is not just necessary to prove that they are false, but also that they drastically call into question the economic fundamentals of society”, she explains. “From a legal standpoint, it seems clear that Musk is wrong,” she adds.
There remains the possibility that the multi-billionaire is actually still looking to renegotiate the price down. This tactic had been used successfully by LVMH: two years ago, the global luxury giant broke off the engagement with Tiffany before obtaining a discount. But experts don’t see what price Elon Musk and Twitter could agree on at this point, as the platform’s stock has lost more than a quarter of its value since late April.
“Both sides have a lot to lose”
“Both sides have a lot to lose,” says Ann Lipton. If Twitter wins in court, the whimsical businessman will have to pay at least a few billion dollars in damages. At worst, he could be forced to honor his commitment and buy the Californian group at the starting price, exorbitant compared to the current valuation, and this while his fortune has shrunk by a few tens of billions of dollars in recent months.
But this victory for shareholders would leave the company and the iconic social network in the hands of Elon Musk. However, his vision is not at all aligned with that of many employees, users and advertisers, on whom the economic model of this service depends. “Twitter is in worse shape than it was six months ago, but in the long run it’s still better that it doesn’t belong to Musk,” said Carolina Milanesi.
blue bird humiliated
“It would be like giving a toy to a capricious child who doesn’t want it anymore and doesn’t know what to do with it, and ends up forgetting it in a corner,” continues the Creative Strategies analyst. The bluebird would “slowly and painfully fade away.”
The trial is expected to last months, especially since Elon Musk will drag things out, according to Ann Lipton. The libertarian entrepreneur, followed by more than 100 million people on the platform, “will seek to humiliate them, and it will be demoralizing for the employees,” she says. He has already harassed the service with very critical tweets, mockery and outlandish suggestions, encouraged by his many fans.
A battle on all fronts
For Twitter, “it’s going to be a battle on all fronts, to keep their engineers, not to lose ground, to preserve their brand image and deal with questions from investors,” elaborates Dan Ives. Unlike its neighbors in Silicon Valley, the tweeting network never became a money-making machine capable of turning user attention into astronomical ad revenue.
“In recent months, Twitter has not been able to focus on its business. They will end up with the same problems they had before Musk,” says Debra Williamson of eMarketer. “User growth is slowing. And revenue is growing at the margin, but the group is now facing a global economic slowdown that is affecting budgets across all social networks.
(AFP)