Tesla’s recent dismal situation is why many experts worry that the richest billionaire on the planet will give up on buying Twitter.
In 2018, Elon Musk promised to open a peanut candy company to compete with billionaire Warren Buffett’s candy company See’s Candies. However, Musk later changed his mind and the company was never formed.
From that example, Reuters said it is entirely possible that Elon Musk unilaterally terminates the $44 billion acquisition of Twitter.
What would happen if Elon Musk “cancels the deal”
Elon Musk will have to pay Twitter a $1 billion termination fee in case he fails to buy the company for $44 billion, according to SEC filings.
Even as Musk intends to walk away from the deal, Twitter’s lawyers are urging him to complete his offer to buy the company or have to pay a unilateral termination fee.
Conversely, if shareholders agree to cancel the deal, or another individual or group makes a better offer, which Twitter’s board accepts, Twitter must also pay Musk $1 billion. .
Under the agreement, though, the company’s board of directors cannot proactively propose these deals and will only respond when asked.
However, if Musk unilaterally terminates the contract, Twitter could be plunged into crisis with plunging stock prices, staff confusion and mismanagement. “It’s over. We had a great year in 2021, but now it’s just chaos,” a former Twitter executive told Insider.
Twitter’s biggest problem right now is stock volatility. Shares in the company soared shortly after Musk announced he would take a 9.2% stake. So if Musk walks away from the deal, the company’s stock price could plummet.
Even, Musk has said that if the deal fails, he may sell Twitter stock. “If the buyback proposal is not approved, I will reconsider my shareholder status,” he asserted.
The richest billionaire on the planet has plenty of reasons not to buy Twitter. One reason is the recent performance of electric car company Tesla.
Tesla has lost more than $275 billion, or 23% of its market value, since Musk disclosed his 9.1% stake in Twitter. That suggests Tesla investors aren’t optimistic that the company’s CEO owns the social network Twitter.
That way, if Musk pulls out of the Twitter deal, Tesla’s stock price could rebound, even enough for him to pay the termination fee.
On the other hand, Tesla’s main market is China. Tesla China achieved impressive deliveries in 2021, allocating half of its vehicles to the domestic market and accounting for a quarter of sales.
Meanwhile, Twitter has remained unpopular in the market, especially after the social network restricted content related to the Hong Kong protests. So if Musk succeeds in acquiring Twitter, the Chinese government may have to watch out for Musk’s Tesla.
Also, Elon Musk’s intentions to turn Twitter into his own property may not go so well. EU Commissioner Thierry Breton said in an interview with the Financial Times that the company faced the risk of account lockouts if it broke the law or posted malicious content.
In the U.S. market, tech companies must also be wary of these regulatory risks, despite policy easing. So, recently, Apple has had to restrict the apps that appear on its App Store.