8 ways the Elon Musk-Twitter saga could end

8 ways the Elon Musk-Twitter saga could end


Elon Musk arrives at the In America: An Anthology of Fashion themed Met Gala at the Metropolitan Museum of Art in New York City, New York, May 2, 2022.

Andrew Kelly | Reuters

In the latest twist in the Elon Musk-Twitter saga, the world’s richest man told the social media company he no longer intends to buy it. Twitter chairman Bret Taylor promptly fired back that the company intends to go to court to enforce the $44 billion deal’s closure at the agreed upon price and terms.

Predicting how the drama will ultimately conclude is difficult, especially with the mercurial dealmaker involved. But here are eight possible scenarios.

1. Deal ends, Musk pays breakup fee

In theory, this may be the cleanest option for everyone — no litigation, Musk agrees to pay the contract’s $1 billion termination fee and Twitter carries on, albeit at a valuation significantly lower than $44 billion. This is the path Twitter co-founder Ev Williams appeared to back when he tweeted that he would be asking if “we can just let this whole ugly episode blow over” if he were still on the board.

The problem is the board could be breaching its fiduciary duty if it lets Musk walk − and Taylor’s response suggests Twitter has no intention of doing that.

Twitter also has a strong legal argument that Musk locked himself into buying the company for $54.20 a share. Allowing him to walk away after only paying the breakup fee would probably push Twitter’s shares even lower. They’ve already been trading at a significant discount as investors question if and when a deal will happen. On Friday, the stock closed at $36.81.

“They can’t just say, ‘Alright, let’s spare us the pain, Elon, we’ll let you knock the price down by $20 per share, or we’ll settle, we’ll agree to walk away if you just pay the billion-dollar break fee,” said Ann Lipton, a professor of corporate governance at Tulane Law School. “Twitter is just not in a position to be able to do that.”

2. Twitter wins in court, Musk buys the company

There’s no precedent for a judge upholding a so-called “specific performance” clause to enforce a contract for a deal as large as $44 billion. But there are examples of judges forcing buyers to close deals even when they don’t want to.

In 2001, the Delaware Chancery Court ruled Tyson Foods had to buy IBP Inc., then the largest U.S. beef distributor, at the previously agreed upon price of $30 a share. Tyson had tried to pull out of the deal after both companies’ financial performance declined after the deal was signed — just as Musk is trying to walk away from Twitter. A judge decided Tyson couldn’t just walk away because of buyer’s remorse, and the company was forced to acquire IBP at its originally agreed upon price, which valued IBP at $3.2 billion. To this day, Tyson owns IBP.

Tyson Foods Inc., sign at Tyson headquarters in Springdale, Ark.

April L. Brown | AP

Having the deal enforced could be the best case scenario for Twitter investors, but could leave Twitter and its employees facing a volatile future. If Musk truly no longer wants to own Twitter, forcing it upon him may lead to yet another sale, more leadership changes, and an employee base caught in a whirlwind of uncertainly that could persist for years.

3. Twitter wins in court, Musk pays damages

As Vanderbilt law professor Morgan Ricks tweeted, it’s possible a judge would choose to have Musk pay damages rather than enforce ownership, especially with Musk’s track record of flouting government rules and regulations. A judge may be concerned that if Musk doesn’t want to buy Twitter, he could make an ownership transition so difficult that the collateral damage would be brutal.

If so, a judge could order Musk to pay billions of dollars in damages to Twitter instead of taking ownership. The amount of damages paid would be up to the court.

4. Musk agrees to settle with Twitter

In this case, Musk would likely pay his $1 billion breakup fee and billions more in a brokered settlement with Twitter. The settlement would likely have to be enough that Twitter’s board would be able to argue to investors it made the right fiduciary decision to take the settlement money instead of pursuing litigation.

5. Musk wins in court, pays no break fee

Sheldon Cooper/SOPA Images | Lightrocket | Getty Images

6. Musk changes his mind again

7. Musk and Twitter agree to a lower price

8. A white knight buys Twitter

This may be the most unlikely option of all, but it’s possible another company could swoop in and buy Twitter at a lower price than $54.20 per share. Twitter’s board could argue that deal provides more certainty than going to court with Musk.

Still, a scenario where another buyer acquires Twitter seems more likely to happen after litigation, if Twitter loses or settles. Then, Musk would be out of the picture, but Twitter will have explored its options to either get the full $44 billion or additional damages.

There are no known buyers interested in buying Twitter.

WATCH: Elon Musk terminates Twitter deal and claims board in material breach

Quoted from Various Sources

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