July 11, 2022, 2:29 pm | Read time: 3 minutes
Elon Musk has now canceled the Twitter acquisition. The company plans to sue the world’s richest man because of it.
Normally, you can return something purchased–within certain time frames. Elon Musk seems to have thought the same. After agreeing to acquire Twitter in the spring of 2022, the Tesla CEO and world’s richest man now apparently doesn’t want to buy the social network. Twitter could sue him for this–and apparently plans to do so. This could become very expensive for Elon Musk.
Twitter Acquisition Collapses Due to Elon Musk
There has actually been an agreement between Elon Musk and Twitter since April 2022 that the billionaire would buy the network for $44 billion. Detailed negotiations have been ongoing since then. However, on Friday, July 8, 2022, Musk’s lawyers filed a document with the U.S. Securities and Exchange Commission, officially withdrawing the Tesla CEO from the purchase. The main reason cited: Twitter allegedly understated the number of so-called spam bots on its platform. These are user accounts that automatically spread propaganda, for example. Musk and his team accuse Twitter of having fewer real users than they admit. Industry experts had already seen this argument, presented by Musk in recent weeks, as a tool to lower the purchase price.
That Elon Musk now wants to call off the Twitter acquisition entirely is not entirely surprising, as he had already made several hints in this regard. Twitter, however, had clearly stated in response to these hints that it intended to take legal action. Now, board chairman Bret Taylor has announced that this is likely to happen. Twitter is also confident of winning this legal battle.
Also interesting: Elon Musk has only played one console game in his life
Failed Acquisition Could Be Costly for Musk
The case is therefore likely to end up in court in Delaware. Many large companies, including Facebook, Google, and Apple, are based in the small state due to its favorable tax situation. A contractual penalty of $1 billion is at stake. That probably won’t hurt Musk much. However, it is also possible that the court will decide he is obligated to buy Twitter. Then the agreed $44 billion would be due. So far, Elon Musk has avoided questions about Twitter. In addition to the accusation of numerous spam bots understated by Twitter, there is also the issue of transparency. However, there is no evidence that Twitter withheld information from Elon Musk and his team.
Incidentally, Musk’s attempt to acquire Twitter has not necessarily had a positive impact on the company. Since April 2022, when the acquisition became known, Twitter shares have lost more than a quarter of their value, and the same is true for Tesla.
Fun fact: Twitter is working with the same law firm for its lawsuit that advised Elon Musk and Tesla back in 2018. At that time, Musk announced plans to take Tesla private; it ultimately didn’t happen. However, the SEC accused him of market manipulation, and he had to pay a $20 million fine.