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 believe that Musk won’t be able limit himself to a $ 1 billion penalty if the deal is rejected. Damage will be added to this amount by the court upon the request of the victim.
The CNBC resource explains that the $ 1 billion penalty previously agreed to by the lawyers is payable only by the party initiating the transaction’s termination in the event of any external factors that prevent it from being completed as per the original conditions. One example of such an explanation is claims from regulators, or problems with 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 say that a significant drop in Twitter’s assets value is not sufficient to permit Musk to abandon his plans to buy the company. Instead, he will be left with $ 1 billion. However, most analysts agree that Musk could use the opportunity to negotiate price reductions. He may feel pressured by his deal partners, even though he isn’t particularly concerned about the value of Twitter’s assets.
Elon Musk stated that he is still open to buying Twitter. In this case, a substantial change in conditions would be 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. This will not only cause serious damage to Musk’s reputation, but it will also make any future attempts to purchase other companies seem suspicious.
Parag Agrawal, Twitter’s CEO, said Friday that he still hopes Elon Musk will sign the deal. However, he is ready for any scenario and is doing everything in his power to make the company a success. His job, he said, is to build Twitter on a daily base.