Elon Musk revealed on Friday that his planned $44 billion(R 711B) acquisition of Twitter is “temporarily on hold,” adding to rumours of internal friction surrounding the deal.
Following Musk’s remarks, Twitter’s stock fell approximately 20% during early morning trading hours. Tesla’s stock price jumped by 5%.
Musk agreed to pay $54.20 (R876) per share for Twitter, but the company’s stock is currently much lower.
Elon Musk said that his planned acquisition of Twitter had been postponed due to concerns over bogus accounts, a stunning change of events that stunned investors and cast doubt on Musk’s resolve to finish the transaction.
The billionaire linked to a May 2 Reuters report citing a Twitter financial filing that stated bogus or spam accounts accounted for fewer than 5% of the company’s “monetizable daily active users” in the first three months of 2022.
Musk, however, cannot just walk away from his commitment to acquiring Twitter since he is required to pay a $1 billion(R16B) breakup fee. The situation is significantly more convoluted.
A reverse breakup fee is levied when an external reason, such as regulatory intermediation or third-party funding issues, stops a deal from concluding. A buyer can also walk out if the purchase involves fraud, according to a top M&A legal counsel with knowledge of the issue.
A market fall, such as the recent sell-off that has resulted in a drop in Twitter’s market valuation of more than $9 billion(R145B), would not be a valid basis for Musk to part ways, breakup fee or no breakup fee.
Still, there’s a chance the sale will go through. Musk tweeted two hours later that he is “still committed to purchase.”
According to sources familiar with the incident, Musk’s attorneys encouraged him to send the follow-up tweet.
Meanwhile, Musk has made another bullish declaration about the joke cryptocurrency Dogecoin (DOGE) in the midst of huge market sell-offs.
Tesla’s CEO agreed that Dogecoin “had potential as a currency.” His remark came in reaction to Dogecoin co-creator Billy Markus’s remark that he appreciates the meme-based cryptocurrency because “it knows it is stupid.”
Musk stated again in his tweet that Dogecoin is the best cryptocurrency for transactions. In contrast, he argues Bitcoin is better suited as a form of value storage.
Musk, also known in the cryptocurrency world as “The Dogefather,” remarked that DOGE is “the people’s cryptocurrency.”
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