Unless you’ve been living under a rock, you, too, have been bombarded with news about Elon Musk’s hostile acquisition of Twitter. Yesterday, rumours surfaced that Elon Musk’s Twitter handle had been suspended after news broke about Musk pulling out of the deal.
However, looks like it was just another spam account that Twitter took down (the L in Elon was replaced with a capital “I”); the very concern that is apparently making Musk reconsider his enthusiasm for making Twitter the platform for “free speech”.
What is happening?
TL;DR, Elon Musk, who was so keen on acquiring Twitter has now said that the deal is off. And Twitter? Well, they’re ready to drag him to court. If that happens, this looks like an expensive battle ahead for both parties.
Why is Elon Musk backing out of the Twitter deal?
Musk stated his desire to end the arrangement in a complaint with the US Securities and Exchange Commission (SEC). He cited two reasons for this – Twitter’s “material violation” of their contract and “false and misleading” claims made during discussions.
Musk argued that Twitter has still not given him the information he wanted on the frequency of bots or spam accounts on its network, an issue he initially brought up in May. Until he received the information from Twitter, which claimed that spam and bot accounts made up fewer than 5% of its total users, he had declared that the agreement was “temporarily on hold.” Reports say that Twitter deletes almost a million fake accounts daily.
Is that the whole truth?
Well, a lot of speculations have been making their way to the limelight since this incident. Many are of the opinion that this is Musk’s way of escaping this deal. Twitter’s stock price has dropped by almost 24% since this acquisition was announced.
Moreover, how is Elon Musk going to finance this deal?
Musk had previously committed $27.25 billion in stock; in May, he had informed the US SEC that the deal would now comprise $33.5 billion. Additionally, he had raised nearly $7 billion from investors, including Prince al-Waleed bin Talal of Saudi Arabia, by selling Tesla shares valued at approximately $8.5 billion.
He had nonetheless disclosed to the SEC that he was still looking for further funding and was in discussions with Twitter shareholders, including former CEO Jack Dorsey, about perhaps keeping their holdings in the business.
But what if he was never able to get the funding he promised he could? Could that be a reason for him trying to trash this deal? Only time and ugly court proceedings shall tell.
So, what’s next for Twitter?
Well, Twitter has made it clear that they will take this to the courts if Musk backs out for real. However, since most M&A cases at Delaware end up in settlements, looks like Musk along with Parag and his team will have to come to a conclusion negotiated by lawyers on both sides.Do you think Musk will successfully back out of the Twitter deal or will he be forced to take it? talk on twitter
The Ideas Project
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Markets Last Week
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Well, every week is not happening! That’s exactly what the market mood was, in the week gone by. The week was primarily dominated by macroeconomic news with a bunch of announcements coming through. Let’s look at some of those:
1) Q1 Results Season Kicks Off with TCS – IT major, TCS came out with its Q1 results on Friday, during post-market hours. The numbers were more or less in line with street estimates. On a yearly basis, net profit grew by ~5%, while revenue grew by ~16%. The company has announced an interim dividend of ₹8/share. Catch up on the full details here.
2) Trade Deficit Hits All-Time High – India’s trade deficit widened to a record $25.63 billion, with exports rising way faster than imports. What is Trade Deficit, you ask? It is the difference in the monetary value of a country’s net exports and imports. So, what’s the current situation? India is importing more than exporting and that is creating this huge gap in our deficit. Read here for a detailed explanation.
This week, we’ve been…
Watching On the Morning You Wake (to the End of the World) on Storyville by BBC: Storyville on BBC brings to you some of the most brilliant documentaries out there! This episode talks about how on the morning of 13th January, 2018, Hawaiians were suddenly confronted by an urgent nuclear threat.
Listening to The Ideas Project hosted by Anupam Gupta: If you want to understand themes and sectors before investing in them, you’ve found the right podcast for yourself! Click here (scroll up for more context) to listen to the first episode!
Elon Musk’s concern about spam accounts stems from his aspirations to increase advertisement revenue from the platform. But whether this adversely impacts users, only time shall tell.
Until then, you ensure you’re hydrated and invested. Have a great week ahead!