Expert on the process with Musk: “Twitter has the upper hand”

“Similar disputes have arisen before, and most often they can be resolved without having to go to court,” said American law professor Brian Quinn.

It wrote Tesla founder and the world’s richest person Elon Musk on Twitter in mid-April. He then referred to a bid he made to buy up the social media company on which the post was published.

The sum: 43 billion dollars, or 450 billion kronor. That equates to one-fifth of Musk’s total assets, if you look at Bloomberg’s estimate.

The offer initially met with opposition from Twitter’s owners – but they changed quickly. Barely two weeks later, Twitter announced that they accepted Musk’s bid. It was then slightly higher: $ 44 billion. The course rushed after the message.

Since then, the stock has gone roller coaster on the stock exchange. At the same time, it has been reported that Musk has had difficulty securing financing for the deal. Most of the billionaire’s assets are in Tesla, but he has previously said that no shares from the electric car giant will go to the store.

And on July 8, the tech billionaire gave the sharp message that he completely intended to suspend the deal.

Why has Musk withdrawn his bid?

According to Nicklas Andersson, savings economist at Avanza, this may be because Musk feels that the price is now too expensive.

– Before the bid of 54.20 dollars per share, Elon Musk announced that he had bought just over nine percent of the shares in Twitter. It made the stock rush over 30 percent at most, which was the best day ever for the stock, he says.

But since then, the price has fallen sharply – all in all, it is now down almost thirty percent, to around 36 dollars per share.

According to the savings economist, this is due to all the uncertainty the potential deal has brought with it. But it can also be attributed to the fact that the tech sector has performed poorly overall.

– Twitter is traded significantly below the bid level, which indicates that the market does not believe that the deal will close. Given the price development, it is natural that Elon Musk reviews its opportunities to bring down the price tag, he says.

How do the parties stand in a trial?

Twitter wants to force Elon Musk to complete his purchase of the company. They have therefore sued the Tesla billionaire, and say that he has deliberately wanted to harm Twitter with his actions around the deal.

Should the process go to trial, Twitter has the trump card, precisely because the deal has already been completed. That’s what Brian Quinn, a law professor at Boston College Law School with a special focus on business mergers and acquisitions, says.

– If you look at the argument that the two parties have, Twitter has the upper hand, he says.

But according to the law professor, the outcome is not a given. Musk has a couple of arguments to make in the lawsuit.

One is that Twitter did not inform Musk enough about how many fake users there are on the platform – something the tech billionaire claimed even before he withdrew the deal.

Another is that Twitter fired two senior executives, which Musk believes he had a veto right with the deal.

– But according to Twitter, in the purchase contract they had the right to hire and fire whoever they wanted, Quinn says.

Can it be resolved without a lawsuit?

But the law professor adds that it is likely that the case can be resolved without having to go to court.

– Similar disputes have occurred before, and usually they can be resolved without having to go to court. Then there are two possible solutions, he says.

Either the price can be renegotiated. This has happened before – including two years ago, when Louis Vuitton wanted to buy Tiffany & Co, and the pandemic struck.

– Then they agreed to buy for three percent less, says Quinn.

The second alternative is for the parties to agree that the deal will not go through – but that Musk will then pay a fee.

– In that case, that cost would land at much more than a billion dollars, Quinn says.