Courted and then rejected by the richest man in the world, Twitter appears to be well positioned to win a court battle with Elon Musk for a break fee of at least $1 billion, but the company won’t come out unscathed.
The outcome of the saga left observers baffled. It was “one of the craziest business stories ever,” said Dan Ives, an analyst at investment firm Wedbush.
“I think it started out as a circus show and it’s ending as a circus show,” Ives said.
Musk, founder of the electric car company Tesla, sent a letter to Twitter on Friday saying he was pulling out of the controversial deal that it did in April, which consisted of buying the platform at a rate of 54.20 dollars per share, or a total of 44 billion dollars.
However, such merger agreements are “designed to prevent buyers from backing down and deciding to walk away”, explains Ann Lipton, a professor of law at Tulane University, a specialist in corporate litigation.
Musk, who also chairs aerospace company SpaceX, accused the social network of making “false or misleading statements” about the number of fake accounts on its platform.
His lawyers also pointed out that Twitter fired employees and stopped hiring, a practice that they consider contrary to the company’s obligation to continue operating normally.
Those arguments may hold water, but they don’t warrant getting out of business altogether, says Lipton, who calls the move “touchy.”
“It’s not enough, unless he can show that the statements (about fake accounts) are not only false, but call into question the fundamental basis of the agreement,” he explains.
“It gives every impression that Musk is legally in the wrong.”
‘Twitter would die’
This opens up the possibility that the billionaire is in fact trying to renegotiate a lower price.
This tactic has been used successfully before, as when two years ago LVMH, the global luxury giant, broke a deal to acquire Tiffany before getting a discount.
However, experts do not see how Elon Musk y Twitter they may agree on a different price at this point, given that the platform’s shares have lost more than a quarter of their value since the end of April.
“They both have a lot to lose,” Lipton warns.
And Twitter wins in court, the unpredictable businessman will have to pay at least a billion dollars in damages.
In the worst case scenario, you could be forced to honor your commitment and buy Twitter at a price that has become exorbitant, while his fortune has been melting by the tens of billions of dollars in recent months.
Although that would be a victory for the shareholders, the company would be left in the hands of Musk and his libertarian vision of absolute freedom of expression, a position with which they do not agree. many of the employees, users, and advertisers that the platform’s business model depends on.
“Twitter it’s worse now than it was six months ago, but in the long run, it’ll be better off without it,” says Creative Strategies analyst Carolina Milanesi.
“It’s like a toy that a spoiled child wants, but doesn’t really know what to do with it, then he gets bored and doesn’t give it the attention it deservesand forgets it in a corner (…) Twitter I would die slowly and painfully,” predicts Milanesi.
‘Battle on all fronts’
Any court proceedings are expected to take months, especially considering Musk will “draw it out,” Lipton predicts.
“Twitter is in a strong position,” he says.
However, Musk “will try to ridicule them, which will be distracting and demoralizing for their employees,” he anticipates.
With more than 100 million followers on the platform, Elon Musk has already shown signs of harassment Twitter with highly critical tweets, ridicule and outlandish suggestions for use, all celebrated by thousands of fans.
For Twitter“It’s going to be a battle on all fronts, retaining employees, watching for competition after your business, brand issues, getting investors to believe the numbers,” says Ives, an analyst at Wedbush.
Unlike its Silicon Valley neighbors, Twitter has never been a money maker capable of translating the attention of its users into astronomical earnings from .
“These months have been a huge distraction for Twitterand have prevented him from focusing on the fundamentals of his business,” says Debra Williamson of eMarketer.
“If Musk is able to undo the deal, Twitter He will still be left with the same problems he had before he came on the scene.”
“Its user growth is slowing. And while ad revenue continues to grow marginally, Twitter now dealing with a slowing economy that could cut ad spending across all social platforms.” (AFP)
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