Twitter Could Sue Elon Musk Over Breach Of Acquisition Contract

Twitter Could Sue Elon Musk Over Breach Of Acquisition Contract
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After Elon Musk tweeted he was putting his acquisition of Twitter Inc (NYSE:TWTR) on hold, the eccentric billionaire could face a lawsuit from the social media company over breach of contract. For Musk to walk away from the deal by just paying a breakup fee, certain conditions must apply.

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Bailing Out?

As reported by CNBC, Elon Musk said he was putting the Twitter deal on hold due to “pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” as he himself tweeted.

However, the social media company could sue Musk over breach of contract, after the two parties agreed to a reverse termination fee of $1 billion in April, once news of the deal broke.

The case might be grounded on the fact that certain conditions need to apply for Musk to pay the reverse breakup fee and just walk away, as the fee applies when the deal cannot be closed due to external reasons.

Among them are regulatory issues detected by the U.S. watchdog or third-party financing concerns.

A Complex Matter

According to a senior M&A lawyer, the breakup fee conditions mean that, for instance, Twitter’s current sell-off, which has made the company lose over $9 billion in market cap, could not count as a valid reason for the billionaire to cancel the deal, regardless of a breakup fee agreement.

The expert asserts that, should Musk argue that he overpaid and cancel the deal, Twitter could counter-attack with a multi-billion lawsuit in damages, plus the $1 billion agreed in the breakup deal.

However, analysts say that Musk is looking for a lower price ever since the company’s shares dropped by 23% after the billionaire announced the deal.

Toni Sacconaghi, Bernstein senior research analyst, said Friday on CNBC’s “Squawk Box,”

“This is probably a negotiation tactic on behalf of Elon. The market has come down a lot. He’s probably using the guise of true active users as a negotiation ploy.”

CNBC reports that, even though Elon Musk said he is still committed to acquiring Twitter, he could bail given “the losses he is incurring on paper with regard to his Tesla Inc (NASDAQ:TSLA) equity ownership.”

Shares of Tesla are down about 24% over the last month.

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Cristian Bustos is senior editor for Previously, he was the news correspondent in Germany for Colombian radio broadcast Blu Radio, where he covered the 2017 German federal election and the 2017 G20 Hamburg summit. He was also public relations consultant to EY and HAYS, and has covered a wide range of topics including business, finance, and international relations, as well as verticals such as automotive, aerospace and renewable energy. Email him at
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