Home Technology What could make Elon Musk back out of his bid to acquire Twitter- Technology News, Firstpost

What could make Elon Musk back out of his bid to acquire Twitter- Technology News, Firstpost

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As slim as they may be, there are some chances that Elon Musk might have to abandon Twitter’s takeover bid. The acquisition of Twitter is going to be a long drawn process, during which a lot of things can go wrong.

What Can Stop Musk From Buying Twitter

On the face of it, it seems all but certain that Elon Musk will be the new owner of Twitter, and that one of his companies, X Holdings, will be acquiring Twitter, by the 24th of October this year. However, between now and then, there are a number of hurdles that may trip Musk and derail his bid to take over Twitter. 

And if Musk or Twitter for that matter decide to pull out of the takeover bid under certain conditions, one will have to pay the other a withdrawal fee of $1 Billion. We a look at some of the biggest issues that Musk and his team might face.

Shareholders May Not Agree

We begin with the unlikeliest of scenarios. Yes, the board of directors have accepted Musk’s bud, but they still need the approval of their shareholders. If the majority of the shareholders agree with the proposal that the board of directors present them with, i.e. of $54.20 per share, then the company will be sold to Musk, and then delisted from the New York Stock Exchange. If the majority of the shoulders vote against selling their stocks, the sale of the company will not be going through. Given that Musk’s offer for each share contains a small but still significant premium, most shareholders are likely to sell their holdings.

FTC, SEC Or Other Regulatory Agencies Intervening

This wouldn’t be unprecedented. Several government agencies have blocked mergers and takeover bids in the past, citing a variety of issues. These agencies have the power to shut down the takeover bid, even if they get just a hint of misappropriation or fraud.

What Can Stop Musk From Buying Twitter

Musk anyway has a tumultuous relationship with the SEC, or the Securities and Exchange Commission, and has been charged with fraud before.

Twitter Getting A Better Offer

Another unlikely, but still plausible scenario, is that the board of directors at Twitter, get a better offer. In such a scenario, they will have to allow Musk to make a counteroffer. However, if the board finds the counteroffer not satisfactory, they can pull out of the deal. In such a scenario, Twitter will have to pay Musk a withdrawal fee of $1 Billion.

Surprising Discoveries During Due Diligence

The reason why the takeover will take a long time is that Musk and his team will be going over Twitter’s finances, business dealings, and a number of other aspects, with a fine-toothed comb. In case they find any irregularities that may come to haunt Musk and X Holdings, they have the right to pull out of the deal.

What Can Stop Musk From Buying Twitter

The Platform Undergoing A Massive Shift

This is where things get a little tricky. The platform will obviously be undergoing a massive change, with several users leaving and several other users coming back to the platform. Just the announcement of Musk buying up Twitter saw hundreds of thousands of account deactivations which have been all organic, according to Twitter.

Plus, there is also the issue of bots. In case during discovery, it is found that the number of real users that Twitter claims it has is significantly bloated, Musk can step away from the deal, without any consequences. 

Tesla’s Performance

Ever since news broke that Twitter’s board of directors had accepted Musk’s bid to buy Twitter, Tesla’s stock has dropped by 10 per cent. Now, given the volatility of the US market, a movement like this can be expected. The issue is that it hasn’t been able to rally upwards ever since the fall, not in any significant manner at least.

Invariably, if Tesla’s stocks continue to fall, Musk may have to revisit his bid to take over Twitter. In such a scenario, Musk will have to pay the withdrawal fee.

It will be interesting to see how the takeover process plays out. What will be more interesting, is whether Musk continues to tweet details about the acquisition, as it goes along.



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