Mixed Messages

Image source: Twitter

What's going on?

Elon Musk said late last week that he’s pulling out of his deal to buy Twitter.

What does this mean?

If you’ve had any dating disasters recently, Elon Musk’s recent treatment of Twitter might ring some all-too-familiar bells. He first laid it on hot and heavy in April, boasting his 9% stake in the social media company before offering to buy it for $44 billion. But then Musk got a classic case of cold feet, and put the deal on hold back in May.

Now it looks like he’s really lost interest: Musk plans to pull out of the deal completely, saying Twitter violated the merger agreement by withholding the information needed to work out how many bots are on the platform – which he believes is “wildly” higher than the 5% Twitter estimated. Twitter’s shares plunged 7% after the revelation, sending them languishing back where they were before this whole debacle.

Why should I care?

Zooming in: See you in court.
Musk can’t escape scot-free, mind you: there’s a $1 billion fee simply for pulling out, but it’s likely to go much further than that. See, some legal experts doubt that Musk’s claims justify him walking away, and they say Twitter could use the terms of the agreement to sue and force him to close the deal. Musk might be in trouble, then: the company’s already planning to sue, and US courts have historically sided with sellers in similar cases.

The bigger picture: Musk might be up to something.
Still, this whole thing could just be a savvy negotiation tactic. After all, Twitter’s market value has fallen by about 30% since Musk made his offer back in April, and the company’s slowing business is making its 2023 growth targets look increasingly lofty (tweet this). Musk, then, could be aiming to renegotiate the deal at a lower price if he is forced to go ahead with it – just like how LVMH bought US jeweler Tiffany & Co back in 2020.

Originally posted as part of the Finimize daily email.

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