On 12 July 2022, Twitter Inc announced the initiation of a legal battle with Elon Musk, the richest person in the world, after he announced on 8 July, his intention to backtrack on the deal to buy twitter at $44 billion. Musk claims that the company violated the agreement by not responding to requests for information on the spam/fake accounts, citing it as a material breach.
In their lawsuit, Twitter declares that Musk broke the terms of the deal, and was really backing out due to financial reasons. They also claim that he broke the US Securities rules when he failed to disclose his nine per cent holding in Twitter. In April 2022, Musk announced his interest in buying Twitter at a share price of $54, by 25 April, the value remained at $52. However, on 13 July, following the lawsuit news, the value stood at $37.
What does it mean?
Elon Musk’s tweets are slated to be used as evidence in the case. Twitter mentioned that the losses faced by Elon Musk’s Tesla in the past months is the real reason for backtracking on the deal alone. They claim that Musk is faltering on the deal simply because he does not want to buy Twitter anymore. The value drop of Twitter is an unfortunate collateral that is the outcome of Musk using Twitter for altering the value. The US Securities and Exchange Commission has been observing the proceedings of the Twitter deal, one could expect their intervention in the case. The SEC has been critical of Elon’s similar behaviour in the past. Since the deal has already been signed, the case may be extremely difficult one for Elon Musk. Many of the cases of this kind, usually end up in parties re-negotiating the terms of the deal or with one party paying the settlement to walk away. The lawsuit is expected to be a showdown on Wall Street.
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