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Elon Musk Tries to Back Out of Twitter Deal

By: Allison Xu

In April, Elon Musk agreed to buy Twitter for $44 billion. He made the company better by adding new features, fending off spam bots, and being more transparent about its algorithms. That led him into getting a lot of support, and getting more than half the total deal price to take over the company.

Now, the tables have turned. Recently, Elon Musk wanted to back out of the deal with Twitter. He claims that Twitter did not give him more information and what he sees as the company’s dimming business prospects.

Twitter is going to sue Elon Musk to close the deal. Twitter also argues that the deal they made with Elon Musk required him to do whatever he can to finish what he started. They also say that he wants to quit only because he no longer wants to honor the financial commitment.

“They’ve signed commitment letters so they’re essentially committed,” said Adam Badawi, a law professor at the University of California at Berkeley. “Other companies wouldn’t want to work with them if they reneged.”

Elon Musk is currently the richest guy in the world, with $218 billion. He signed two agreements with banks including Morgan Stanley, Bank of America and Barclays to loan a total of $25.5 billion.

Many people believe that if Twitter forced a court to get Musk to stick with the original plan, it would be complicated. Something that would likely happen is that the judge makes Musk pay Twitter a fee for putting it through so much trouble, but they would let Musk walk away.

“Musk doesn’t want to own Twitter, the banks don’t want to fund it. We’re in this weird ‘Alice in Wonderland’ situation trying to force this guy to buy a company he doesn’t want to buy,” said M. Todd Henderson, a professor at the University of Chicago Law School.

Musk cannot find a way out of the deal, even if the banks find a way to pull out of the situation. Musk’s agreement with Twitter has a requirement that even if his debt financing becomes unavailable, he still has to go through the deal.

“Him canceling the deal might itself be some sort of breach, but Twitter’s going to say that’s your fault not ours,” says Anthony Casey, a law expert at the University of Chicago.

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