Global Economic Outlook (G.E.O)
Elon Musk’s Twitter Turnaround is no Surprise. Vol. 97. July 11, 2022.
Dear readers, welcome to another edition of the Global Economic Outlook (G.E.O) - our weekly newsletter providing insights on the finance, investment and the economy. Today, we will be discussing Elon Musk’s sudden termination of the deal to buy Twitter.
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Elon Musk’s Twitter Turnaround is no Surprise
Elon Musk has announced that he is walking away from the deal to buy Twitter for $44 billion ($54.20 per share). The ‘free speech’ advocate with the dream of making Twitter the platform for enhancing free speech has pulled out of the deal to buy the social media platform citing concerns over the number of spam and fake accounts.
Twitter estimates the number of spam accounts on the platform to be around 5% of all users but Musk believes that it is more than that and is using that as a justification to call the deal off. Many experts believe that Musk is only looking for an excuse not to proceed with the deal due to deteriorating market conditions already negatively affecting his wealth. For instance, Tesla has lost about a third of its value since the deal was initially announced in April.
Musk’s actions should not be a surprise to those who have seen his antics in the cryptocurrency space where he practically manipulates the market with his tweets. His current plan to pull out of the deal to buy Twitter though will prove costly. There is a $1 billion breakup fee if he is able to walk away but that will probably even be the cheapest option he can get.
There are reports that Twitter has hired Wachtell, Lipton, Rosen & Katz LLP, the prominent corporate law firm, as its legal team to sue Elon Musk. Of course, such law firms charge a lot of money and Twitter must have realized that they have a great chance in court to hire them. Many experts also seem to agree that Twitter has the upper hand in court as they do not believe that Musk’s excuse is material enough to call off the deal.
Some experts even say that Elon Musk might be forced to pay the difference between what he offered ($54.20) per share and the current share price of Twitter. If that happens, Elon Musk will have to pay around $20 billion to Twitter. That is much higher than the breakup fee which is why the legal battle probably looks more appealing to Twitter.
Musk might be the richest man in the world but even he does not have such liquidity and might have to dispose of some of his shares in Tesla to pay any compensation to Twitter. In any case, he was to pledge some of his shareholdings in Tesla to raise the liquidity required to finance the Twitter deal and with Tesla shares dwindling from a bearish market, Musk might have been forced to assess his chances of keeping up with the deal.
We will wait and see how the legal battle between Elon Musk and Twitter plays out but the early signs are that this will be a costly mistake by the World’s richest man.
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The 8th Live Edition of the Global Economic Outlook (G.E.O) was held on Tuesday, 28th June 2022 with experts discussing the state of the Nigerian economy and how Small and Medium Scale Enterprises (SMEs) can navigate the difficult business environment. It is a must watch!
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