Elon Musk’s one-sided termination of his $44 billion acquisition of Twitter has sent the social media company’s stock plummeting. That’s hurting not only investors who bought into the hype of Musk’s takeover, but also Musk himself, who owns roughly 10 percent of Twitter. Now faced with legal action taken by Twitter’s board seeking to enforce the merger agreement, the world’s richest person will be put in an awkward position fighting a company of which he is the largest individual shareholder in court.
Twitter’s share price is down more than 8 percent on the first trading day after Musk called off the deal on July 8. Twitter stock closed at $32.64 today (July 11), which would translate into a net loss of $255 million on the 73 million Twitter shares Musk owns. He bought those shares bought between January and early April at an average price of about $37, according to Securities and Exchange Commission disclosures.
Musk disclosed his ownership in Twitter in April to show his interest in the company and used it as leverage to push Twitter’s board to accept his takeover offer he submitted shortly after. At the time, Musk threatened to sell his 9.2 percent stake in Twitter—which would have sent the stock sinking—if Twitter’s board rejected his bid.
But now it’s Musk who wants to walk away from the deal, and Twitter stock is sinking, leaving him to brace for losses on his existing Twitter ownership.
Losing $255 million would be a lot for most investors, but that’s only a drop in the bucket of Musk’s $230 billion wealth. He can also comfortably afford a $1 billion breakup fee if he is found in breach of the merger agreement with Twitter.
Twitter wants more than a $1 billion breakup fee
But for now Musk doesn’t want to pay the $1 billion, and Twitter wants more than that.
In a letter to Twitter on July 8 announcing his exit from deal, Musk’s lawyers claimed Twitter had violated the merger agreement by failing to provide information regarding its spam accounts per Musk’s request. It will be up to a judge to decide whether Musk’s asks were “reasonable” as spelled out in the agreement. If not, he could be ordered to pay the $1 billion breakup fee.
But Twitter wants the full $44 billion. In a tweet shortly after Musk called off the deal, Twitter chairman Bret Taylor said the company’s board is committed to closing the transaction and will pursue legal action to enforce the merger agreement.
Twitter stock is down 20 percent since the beginning of the year. It briefly jumped to near $50 in April after Musk disclosed his ownership and subsequently proposed to buy the company in its entirety. Now that the deal is off, there’s no sign Twitter stock will jump anytime soon. Meanwhile, as layoffs and recession fears spread across the tech industry, Musk and other Twitter shareholders will likely watch the value of their investments continue to fall.
Musk could face other legal repercussions as well, most likely from the SEC. When he walked away from a highly public proposal to take Tesla private in 2018, he had to pay the securities regulator a $20 million fine for manipulating Tesla’s stock price and resign as Tesla’s chairman.