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The harsh consequences that await Elon Musk if he regrets buying Twitter

Elon Musk's Twitter profile on a smartphone (REUTERS/Dado Ruvic)
Elon Musk’s Twitter profile on a smartphone (REUTERS/Dado Ruvic)

In the preliminary agreement between Elon Musk Y Twitter for the purchase of the social network there is a clause that establishes that undoing the contract entails a billion dollar fine. But the issue is not as simple as simply paying that fine.

Musk reported – precisely through Twitter – that he was putting the negotiation on hold with the social network to be able to investigate whether the number of false accounts in the little bird’s network was actually only 5% of the accounts, as the company alleges. Minutes later he sent a message again clarifying that he is still committed to buying the company.

The existence of the billion dollar clause was known, but That’s not to say that Twitter can’t sue Musk for breach of contract if he backs out of the purchase. Something that could cost the richest man in the world many billions of dollars.

Musk could disassociate himself from the negotiation by paying the multi-million dollar fine if there were a external reason that would not allow the sale of the company, such as financial doubts from a third party or a regulatory problem. But if the deal falls apart due to Musk’s doubts, Twitter has room to sue.

Elon Musk sowed doubts about his desire to buy Twitter
Elon Musk sowed doubts about his desire to buy Twitter

If Musk decides that the price he is paying for Twitter is excessive, Twitter could follow in the footsteps of what jewelry brand Tiffany did in 2020 when it sued the leading luxury market company, the LVMH conglomerate, which tried to get out of the agreement. of purchase of the giant of the jewels. As a last resort LVMH ended up buying Tiffany, but for a lower price than originally agreed. They paid $15.8 billion, instead of the $16.2 billion in the initial deal.

This is precisely the example that is making many think that Musk’s move is not about not wanting to buy Twitter, but that he may be trying to pay a better price. Twitter shares fell 8% today, and 23% since Musk signed the purchase agreement, at a price of $54.20 per share. Twitter’s decline is largely due to an industry-wide decline. The Nasdaq has fallen 11 percent since April 25, the date Musk closed his initial deal with Twitter.

Although Musk has always been skeptical of market fluctuations and claims not to be so concerned about price, for this business he is looking for foreign investment to lower your bet on Twitter. Lowering the price makes the business more attractive to investors.

The value lost by Twitter since April 25 is 9 billion dollars.

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