Why Elon Musk can pause the possession attempt at any time without penalty

Elon Musk does not want to be remembered as the author of one of the most early acquisitions in history.
Since it announced its 9.2% entry into the Twitter Directory on April 4, to subsequently make a public takeover offer (OPA) for 100% of the social network, the Nasdaq Index of tech companies has fallen between 18% and as much as 21%.

However, Twitter has fought back in the stock market during these weeks, gaining the backing of OPA in Musk’s eyes, at $54.2 per share. Now, that network is hacked by Musk himself, who said the show on Twitter is on hold. Shares of the company fell 8% on Wall Street to $40.

The market already had doubts about the takeover offer, given the traditional ups and downs of Musk, who once threatened to launch a bid for minority interests in Tesla, which he never implemented.
Bearish investor Hindenburg Research said last week that Musk had “all the cards in his hand” in his Twitter takeover bid, so he may lower the price to accommodate the Nasdaq correction.

After the letter was released on Friday, the possibility of renegotiation appears to be gaining traction. Musk could tell the Twitter board to either accept a lower price or back out altogether. In that case, he would have to pay $1 billion in compensation, which is low compared to the premium that Musk could pay if he kept $54.2 ($44 billion in total).

US law allows this change to the OPA terms, since Musk has not yet formalized a Transaction Agent Statement with the Securities and Exchange Commission (SEC)‘, a document in which he must ask Twitter contributors to back his bid, if he finally comes forward.

Banks and investors who have pledged to support the takeover bid (including Morgan Stanley, Brookfield and Fidelity) may welcome a downward adjustment in the acquisition price that limits their risk.
However, those same companies could see an even worse overall pullout that leaves them engaged in a controversial new gambit for the Tesla founder.

Still committed to the acquisition

– Elon Musk May 13, 2022

The billionaire initially tweeted early saying that the $44 billion deal was on hold until he received more information about the percentage of fake accounts on the social media site, which sent shares down.

A few hours later, he sent out another tweet saying he was “still committed” to the deal. Twitter shares rose and part of its losses were reduced.

Musk said he is awaiting details about Twitter’s recent profile that fake accounts on the social media platform account for less than 5% of its users. “The average number of fake or spam accounts during the first quarter of 2022 represented less than 5% of our monthly active users during the quarter,” the social network explained in its latest quarterly results.

But this data point has been part of Twitter’s quarterly filings for nearly a decade. The company said it applied “significant judgment” to its latest estimate, and that the true figure could be higher.

Fighting fake accounts has been a cornerstone of Musk’s attempt to reform Twitter. In a statement announcing his agreement to buy the company last month, he revealed his desire to defeat spam bots, authenticate all humans, and make his algorithms open source. It is only part of his thoughts.