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No deal obligations breached, says Twitter over Musk's intention to terminate the purchase deal

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Staff Writer, TLR

Published on July 14, 2023, 17:41:00

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UAE, Dubai, twitter, Musk, agreement, profits, Mark Zgutowicz , CEO, Company, merger, social media

Days after the CEO of Tesla Inc., Elon Musk attempted to back out of the $44 billion deal, Twitter Inc. hit out at Elon Musk on Monday, accusing the world's richest man of knowingly breaking an agreement to buy the social media company. Twitter stated in a letter to Musk that it had not violated the merger agreement, contrary to what Musk had claimed on Friday to terminate the deal. The letter was also filed with regulators on Monday.

The letter read, “Twitter demands that Mr. Musk and the other Musk Parties comply with their obligations under the Agreement, including their obligations to use their respective reasonable best efforts to consummate and make effective the transactions contemplated by the Agreement.” In the letter, Twitter also stated that the merger agreement was still in effect and that it would move forward with the transaction.

Musk laughed off the threat from the firm to sue him to force him to finish the sale on Monday when he posted a series of tweets making fun of Twitter and its promise to enforce the agreement in court. According to persons familiar with the situation who spoke to Reuters, Twitter plans to bring a lawsuit in Delaware early this week.

The greatest daily percentage decline in more than 14 months, Twitter's shares ended the day down 11.3 per cent at $32.65, a 40 per cent discount to Musk's $54.20 offer. In prolonged trading, they recovered by less than 1%. Nearly 7% of Tesla's stock was down at the closing. In fact, trading short-term on Monday, short bets on Twitter's falling stock generated mark-to-market profits of $148 million, while betting against Tesla generated mark-to-market profits of $1.3 billion, according to S3 Partners. According to Benchmark analyst Mark Zgutowicz ”Twitter’s board must contemplate the potential harm to its employee and shareholder base of any additional internal data exposed in litigation.”

Jefferies analyst Brent Thill in a note wrote, “We believe that Elon Musk’s intentions to terminate the merger are more based on the recent market sell-off than … Twitter’s ‘failure’ to comply with his requests. In the absence of a deal, we would not be surprised to see the stock find a floor at $23.5.”

If Musk chooses to fight Twitter's case by arguing that the business overstated the number of phoney accounts, Francis Pileggi, a corporate litigator with Lewis Brisbois in Delaware, warned that Musk may make the social media giant's alleged "bots" the centre of future legal disputes. Pileggi further said, "I’d be surprised if he’s prohibited from getting that information." In fact, Pileggi also said that if the number of fake accounts on Twitter is many times higher than the 5% estimated by Twitter, prospects for negotiations leading to reduced price for the purchase of the social media platform would be open.

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