San Francisco – AFP
Twitter, which the richest man in the world aspired to buy, then abandoned the deal, is facing a legal battle whose board of directors has every chance to win, but the group will not leave it unscathed.
Commenting on the case, analyst Dan Ives said: “It’s one of the craziest economic cases I’ve ever seen. From the beginning it feels like a circus and it ends like a circus.”
Elon Musk sent a letter to Twitter on Friday, announcing that he had terminated the agreement to buy the platform for $54.20 per share, or $44 billion in total.
But Tulane University law professor Ann Lipton says this type of contract is “designed to prevent buyers from panicking and deciding to walk away.”
The head of Tesla and SpaceX cites arguments, including that the board underestimated the number of active non-original accounts on the platform, and did not provide him with the information needed to assess the spam problem.
renegotiation
Musk’s lawyers are talking regarding recent layoffs from Twitter employees, and a hiring freeze, which are in contravention of the group’s commitment to continue operating normally. But the expert in the law of commercial disputes believes that these are not sufficient reasons.
“Musk is looking for weaknesses in the agreement,” she said. But for (false) advertisements, for example, it is not enough to just prove that they are false; Rather, it seriously calls into question the economic foundations of society.” “From a legal point of view, it seems clear that Musk is wrong,” she added.
The possibility remains that Musk is in fact seeking to renegotiate the price cut. This tactic was successfully used with the LVMH group. Two years ago, the luxury conglomerate cut an acquisition with Tiffany, and then took a price cut. But experts do not know what price might allow an agreement between Musk and Twitter at present, while the group’s share has lost more than a quarter of its value since last April. “Both sides have a lot to lose,” Lipton said.
Billions of compensation
If Twitter wins in the courts, Musk will pay billions in damages. In the worst case, he may have to respect the agreement, and buy the group at the price that was set first, which is very high, compared to its current value, while his wealth has decreased tens of billions in recent months.
But this shareholder victory leaves the group and social network in Musk’s hands. His vision does not align with the number of employees, users, and advertisers on which the service economic model depends.
Analyst Carolina Milanesi of Creative Strategies said Twitter is in a worse shape than it was six months ago, but in the long run it’s better that Musk not own it.
humiliation
“It would be like giving a toy to a spoiled child who doesn’t want it anymore, doesn’t know what to do with it, and ends up forgetting it in a corner,” Milanesi said. “The blue bird will slowly and painfully fade,” she said.
The trial is expected to last months, especially as Musk is working to slow it down, according to Lipton. And she added that the businessman, who is followed by more than a hundred million people on the platform, seeks to humiliate them, and that will be a source of frustration for the employees.
He showered the platform with critical and sarcastic tweets and outlandish suggestions with the encouragement of many of his fans. As for Twitter, Dan Ives said, “It will be a battle on all fronts, to preserve its engineers, not lose its standing, preserve its brand image, and deal with investor questions.”
Unlike its neighbors in Silicon Valley, the network has never turned into a money-making machine capable of diverting user attention to astronomical revenue.
Over the past few months, Twitter has been unable to focus on its business, said Debra Williamson of eMarketer Group. They will face the same problems they had before Musk.
“User growth is slowing,” she added. Ad revenue is growing modestly, but the group is now facing a slowdown in the global economy that is affecting the budgets of social networks.”
