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Twitter Inc. shares were halted in midday trading Tuesday after reports indicated that Tesla Inc. Chief Executive Elon Musk was now proposing to purchase the social-media company at his original offer price, suggesting a possible end to the legal saga between the two parties.
A Bloomberg News report said that Musk sent a letter to Twitter
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with the latest proposal to acquire the company for $54.20 a share. Twitter shares were up 13% in midday trading prior to the halt. Trading was first paused due to volatility, and then halted for pending news.
A Wall Street Journal report said that Musk’s legal team relayed the proposal to Twitter’s team “overnight Monday” ahead of an emergency court hearing that was scheduled for Tuesday. The report noted that a Delaware judge asked the two sides to come up with a plan by the end of the day that could bring about an end of the litigation.
Twitter didn’t respond to MarketWatch’s request to confirm receipt of the letter.
Musk agreed in April to buy Twitter in a deal that valued the company at roughly $44 billion, but he later said that he was terminating the deal. The Tesla
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chief cited concerns about bot activity on Twitter and said he believed the company’s management team wasn’t accurate in its public disclosures about the extent of spam activity on the platform.
The two sides have been locked in a legal battle for months, and a Delaware Chancery Court judge was expected to hear from both sides in a five-day trial slated to begin Oct. 17.
“Musk could see the writing on the wall that he was going to lose the trial,” said Josh White, an assistant finance professor at Vanderbilt University, in an email to MarketWatch. “By doing this, he can save legal costs, time and ultimately losing in a very public trial.”
White noted that text messages released in conjunction with the case showed that Musk was aware of Twitter’s bot issue before going forward with his original deal offer, and he doubted that Musk would be able to show that “something really changed” after that point.
“If he offered less than $54.20, Twitter might have proceeded with the trial, and he would be deposed,” White continued. “By offering the original price, he maximizes the chance that Twitter accepts and the trial ends. I expect Twitter’s board to accept the deal and for it to close rather quickly.”
Wedbush analyst Daniel Ives agreed that the Tesla leader’s latest move marked a “clear sign that Musk recognized heading into Delaware Court that the chances of winning vs. Twitter board was highly unlikely and this $44 billion deal was going to be completed one way or another,” he wrote in a note to clients. “Being forced to do the deal after a long and ugly court battle in Delaware was not an ideal scenario and instead accepting this path and moving forward with the deal will save a massive legal headache.”
Vanderbilt’s White noted that the a deal at the original price would be a “big” win for Twitter shareholders.
“The stock price of Snap and Twitter seemed to trade around the same price level before the offer,” he told MarketWatch. “Snap is now a ~$10 stock with a $17 billion market cap. So Twitter’s shareholders win by getting $54.20 rather than having the price drop to $10-20 per share.”
Additionally, he deemed Delaware business law another winner: “This deal shows that even the richest man in the world cannot overcome well-written contracts enforced in a neutral and fair way by the Delaware courts.”
