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Elon Musk’s Resignation from Twitter Deal



By: Claire Ying


In April 2022, Elon Musk was approved for a $44 billion purchase of Twitter. He planned on remodeling the franchise and even found loaners for this pricy purchase. However, months into the deal, Musk has decided to revoke his offer, putting his financial team in jeopardy.


Musk claims Twitter had concealed some of their flaws in what he thinks is a dwindling business. Twitter argues that the two parties mutually agreed to do their utmost to complete the transaction. Because they see Musk’s reasoning for backing out as irrational, they plan to sue him for the deal.


Additionally, the loaners who have agreed to support Musk signed a waiver to refrain from walking out arbitrarily. Adam Badawi, a law professor at the University of California at Berkeley said, “they’ve signed commitment letters, so they’re essentially committed. Other companies wouldn’t want to work with them if they reneged,” meaning that they have a title to uphold.


Due to a prearranged agreement, even if the banks have an excuse to terminate their work with Musk, it does not mean Musk can walk away from Twitter without paying the price. It would just mean that he has no financial support. “Him canceling the deal might itself be some sort of breach, but Twitter’s going to say that’s your fault not ours,” said Anthony Casey, a law expert from the University of Chicago.


If the banks resign, Musk would be expected to pay the $33.5 billion in cash he agreed to, then Twitter would pay off the remaining debt.


There are questions as to why Twitter would want to resolve this conflict anyway. Twitter’s main goal is to placate their shareholders. Each share is worth $36, however, Musk agreed to pay $54 for each share. So, if this transaction does not develop, the company could lose money, and the shareholders would start disputing. If Musk drops out, it would only harm Twitter’s already diminishing stock market value.



Sources:

https://s3.amazonaws.com/appforest_uf/f1658069937348x173603191368131070/Why%20Elon%20Musk%20can%E2%80%99t%20get%20out%20of%20buying%20Twitter%20even%20if%20his%20bankers%20bail%20-%20The%20Washington%20Post.pdf

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