in a series of tweets sent out on Friday, Twitter CEO Parag Agrawal revealed that Elon Musk’s deal to purchase the company could fall through.
A lot has happened over the past several weeks. I’ve been focused on the company and haven’t said much publicly during this time, but I will now.
— Parag Agrawal (@paraga) May 13, 2022
Preparing for all scenarios
†While I expect the deal to close, we need to be prepared for all scenarios and always do what’s right for Twitter,” Agarwal said. “I’m accountable for leading and operating Twitter, and our job is to build a stronger Twitter every day.”
Musk already had tweeted earlier on Friday that the deal was on hold until he could determine how many fake accounts, like spam bots, were present on the platform. This move led to the stock sinking by almost 10 percent.
But getting out of the deal may prove more complicated than previously thought. Musk may have to pay a $1 billion reverse termination fee to Twitter and risk a lawsuit for breach of contract that could cost him plenty more.
This is because in this case there is no outside reason the deal can’t close such as regulatory intermediation, third-party financing concerns, or fraud. Only these three reasons would allow Musk to walk away from the deal without any responsibility to Twitter.
A possible walkout
So why is he claiming he might be canceling the deal?
It could be to nudge Twitter into lowering its price.“This is probably a negotiation tactic on behalf of Elon,” Toni Sacconaghi, Bernstein senior research analyst, said Friday on CNBC‘s “Squawk Box.” “The market has come down a lot. He’s probably using the guise of true active users as a negotiation ploy.”
If he does go ahead with the deal’s cancellation, he is bound to suffer deep reputational damages that would make companies in the future uncertain of selling to him and even doing business with him. Now, that’s an option that doesn’t fare well for the billionaire entrepreneur!