Twitter shares halted trading after stock surged on news of a move on with Elon MuskTo buy the company after months of legal battle.
Musk offered to buy the San Francisco company for a second time for $54.20. Shares jumped nearly 13% to $47.95 before the close of trading.
Bloomberg News reported Tuesday that Musk made the offer in a letter to Twitter, according to people familiar with the matter, who were not identified. The Wall Street Journal also said that the Tesla CEO has decided to go ahead with the acquisition.
Musk has been trying to back away from the deal for several months after he signed on to buy the social media platform in April. Shareholders have already approved the sale. Musk claimed that Twitter underestimated the number of fake accounts on its platform, and Twitter sued when Musk announced the deal was closed.
Neither Twitter nor Musk’s lawyers on Tuesday responded to messages seeking comment.
The trial to force Musk to buy Twitter is set to begin in Delaware Chancery Court on October 17.
climbing legal battle
Musk’s reasoning for walking away from the deal – based largely on allegations that Twitter misrepresented how it measures the magnitude of “spam bot” accounts that are useless to advertisers. But most legal experts agreed that they faced an uphill battle convincing the court’s chief justice, Chancellor Kathleen St. Jude McCormick, that little had changed since the April merger agreement that ended the deal. justifies.
Legal experts have generally said that Twitter had the upper hand in the lawsuit, which Twitter filed in July. Twitter is seeking “exclusive performance” of the contract with Musk, which means it will have to buy at the original price. The contract signed by Musk also carries a breakup fee of $1 billion.
“This is a clear indication that Musk identified going to Delaware court that the chances of winning versus the Twitter board were very low,” Wedbush analyst Dan Ives wrote in a note to investors. “Being forced to make a deal after a long and ugly court battle in Delaware was not an ideal scenario, and instead accepting this path and moving forward with the deal would have avoided a major legal headache.”
Among the measures that will favor Twitter is a court order for the deal to go through. The Chancery Court last year forced private equity firm Kohlberg & Co. to go through a $550 million buyout of DecoPack, a Minnesota-based company that itself is the world’s largest supplier of cake decorating supplies to professional decorators and bakeries. says. The case was emblematic of the court’s common – though not uniform – resolution to impose contractual obligations on buyers.
Other options include forcing Musk to pay a breakup fee if each party agrees that the deal is held responsible for falling through. Or he may have to pay a sizable sum without actually buying the company for $44 billion.
Legal experts have said that Delaware courts are picky about what they interpret as a valid reason to back out of a deal. A lawyer said the gap between what Musk made the offer in April and what Twitter knew about the company’s status was huge, and there is little evidence of it, a lawyer said.