[Summary] "Elon Musk Resumes Twitter Acquisition" Despite Cancellation Threat, Stock Soars 22%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Is this another whim of Elon Musk, CEO of Tesla, who is known for his eccentric behavior? Musk, who had unilaterally declared the termination of the Twitter acquisition and was preparing for a legal battle, has decided to proceed with the original $44 billion (62.8 trillion KRW) deal.

On the 4th (local time), social media company Twitter reported to the U.S. Securities and Exchange Commission (SEC) that Musk had made this proposal.

According to the disclosure, Musk stated in a letter sent to Twitter that he would stop the lawsuit over the termination of the acquisition contract and proceed with the existing acquisition contract at $54.20 per share. This reversal came just three months after Musk unilaterally declared the termination of the acquisition contract in July.

Musk's legal team delivered a letter containing this information to Twitter and the Delaware Court of Chancery the day before. After this news was made public, Musk confirmed his acquisition stance through his Twitter account that afternoon, saying, "The Twitter acquisition is a catalyst for creating all applications of X."

Musk's reversal of the acquisition termination drew attention as it came just about two weeks before the court battle between the two parties. Musk had agreed to acquire Twitter at $54.20 per share in April but abruptly terminated the contract on July 8, just three months later. Twitter then filed a lawsuit to enforce the contract, and the court was scheduled to hold a related trial for five days starting on the 17th.

Locally, many believe that Musk reversed his termination declaration because he judged that his chances of winning the legal battle with Twitter were slim. Until now, Musk's side had argued that Twitter did not provide sufficient information about fake accounts, which constituted a breach of the 'Material Adverse Effect' clause justifying contract termination. However, Twitter pointed out that the fake account issue raised by Musk was just an excuse and that the sudden termination was due to the stock price plummeting amid this year's market downturn.

Eric Talley, a professor at Columbia Law School, speculated that Musk likely concluded that losing the trial would result in embarrassing court testimony as a witness and the burden of litigation costs, making it disadvantageous. Bloomberg News reported, "Musk may have judged that his chances of winning the trial were too low. Legal experts had expected Twitter to win the court battle from the beginning," adding, "It is very unusual to propose to proceed with the deal under the original terms just before the trial."

However, doubts surrounding the acquisition deal remain. Twitter confirmed its intention to finalize the acquisition contract in a separate statement that day but did not clearly state whether it would drop the lawsuit.

Andrew Jennings, a professor at Brooklyn Law School, said, "Twitter is unlikely to drop the lawsuit based solely on Musk's words," and noted, "There may be concerns about Musk's proposal." Since the trust between the two parties was already broken by the previous termination declaration, this change of stance could also be seen as another time-buying tactic by Musk. Professor Talley also predicted, "Twitter may want to negotiate with Musk while simultaneously proceeding with the lawsuit to prepare for the possibility that the acquisition contract could be broken again."

Following the news that Musk decided to proceed with the contract as originally planned, Twitter's stock price soared on the New York Stock Exchange that day, and trading was temporarily halted at one point during the session. Trading was halted at $47.95, nearly a 13% increase, and when trading resumed that afternoon, Twitter closed the session with a 22.24% surge at $52. However, this is still below the acquisition price of $54.20 per share proposed by Musk. Regarding this, economic media CNBC analyzed that some skepticism remains in the market about whether the acquisition deal will be completed.