Elon Musk

The world’s richest man, Elon Musk, on Friday submitted a cancellation request to the US Securities and Exchange Commission (SEC) for the purchase of the microblogging app, Twitter. Elon Musk is bailing on the Twitter deal worth $44 billion or £36 billion on the premise that the social media app hasn’t truthfully disclosed the exact number of fake accounts on its platform. Elon Musk also claims that Twitter broke the contractual agreement by firing two top executives and employees. 

In case you missed it 

  • Twitter’s board of directors accepted Elon Musk’s $44 billion bid to purchase the company just after acquiring 9.1% of stake in the company.
  • Following Elon Musk’s agreement with Twitter’s board of directors, the multi-billionaire developed buyer’s remorse after realizing that fake accounts made up 5% or more of Twitter’s 229 million users.  
  • Mr. Musk then temporarily halted the acquisition of the app to enable him to understudy the social media company to uncover the exact number of fake user accounts. Elon Musk filing to the US Securities and Exchange Commission (SEC) seeks to permanently terminate the deal. 

State of play 
Twitter’s chairman, Bret Taylor, in response to Mr. Musk filing to the SEC has hired U.S. law firm Wachtell, Lipton, Rosen & Katz LLP to force Mr. Musk, the chief executive officer of Tesla, to complete the deal. The current situation promises a legal battle between Mr. Musk and Twitter, with the Court of Chancery in Delaware, the deal’s ultimate decider. 

  • While Twitter’s favored outcome of the legal case is to force Mr. Musk to proceed with the purchase, the latter needs to argue that there is an adverse effect on the transaction to terminate Twitter’s purchase. This is a long shot as court rulings rarely favor apprehensive buyers like Mr. Musk. 
  • If the court reveals that conditions such as funds needed to complete the deal are in place, Twitter could press Mr. Musk to proceed with the purchase.

What you should know 

  • American banks, including Morgan Stanley, Goldman Sachs, JPMorgan, Bank of America, Barclays, and Allen & Co could lose about $192 million in earnings if the deal between Twitter and Elon Musk doesn’t go through. 
  • Although the banks involved in the deal would earn some cash from advisory roles, they can only collect a lump sum of their earnings if the deal closes. 
  • Morgan Stanley, BofA, Barclays, MUFG, BNP Paribas, Mizuho, and Société Générale have already written a $13 billion loan to support Elon Musk’s acquisition of Twitter. 
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