Investors were alarmed by Elon Musk’s announcement yesterday about stopping preparations for the Twitter acquisition. Now, the company’s capitalization has fallen to $9 billion below the original name. Experts say that Musk will not be allowed to pay a penalty of $ 1 Billion if the deal is canceled. Any damage will be added by the court, at the request the injured party.
The explanations provided by CNBC’s lawyers indicate that the penalty of $ 1 Billion is only payable by the party initiating termination of the transaction if it is prevented from being executed in accordance with the original conditions. This could include claims by regulators or problems in financing the transaction. If significant forgery was found in the data provided to the other party during negotiation, one of them could refuse to issue it.
Experts explain that a significant decline in Twitter’s assets is not enough to allow Musk to cancel his plans to purchase the company. He will still be able to get $ 1 billion. Many analysts agree that Musk can take advantage of the price reduction pause to reduce his risk. He may feel pressured by his deal partners, even though he isn’t particularly concerned about the value of Twitter’s assets.
Elon Musk said that he was willing to buy Twitter. In this case, a substantial change in the conditions is required to terminate the transaction. Musk could abandon his original plans if the damage that could be caused by a decline in Tesla’s stock price, which to some degree still provides funding for the purchase, is greater than the costs of ending the deal. It is true that this will do serious damage to Musk’s reputation and any future attempts at buying other companies will be met with suspicion by his counterparts.
Parag Agrawal, Twitter CEO, stated on Friday that he still hopes for Elon Musk’s deal, but is prepared for all scenarios and making every effort to improve the company. He admitted that his job is to make Twitter stronger every day.