Trading in shares of Twitter was halted after the stock spiked on reports that Elon Musk would proceed withto buy the company after months of legal battles.
For a second time, Musk offered to buy the San Francisco company for $54.20 a share, according to a regulatory filing today. Earlier Tuesday, Bloomberg News had reported that Musk made the proposal in a letter to Twitter, according to people familiar with the negotiations.
A spokesperson for Twitter told CBS News on Tuesday, “We received the letter from the Musk parties which they have filed with the SEC. The intention of the company is to close the transaction at $54.20 per share.”
Twitter shares jumped nearly 13% to $47.95 before trading stopped. After it resumed, the stock continued climbing and closed at $52, up 22% on the day.
The regulatory filing confirmed that Musk made the proposal in a letter to Twitter on Monday, notifying the social media company that he intends to proceed with the deal according to the original terms of the purchase.
Musk had been trying to back out of the deal for several months agreeing to buy Twitter in April. Shareholders have already approved the sale. In pushing to abandon to the transaction, Musk claimed that Twitter under-counted the number of fake accounts on its platform, and Twitter sued him after he announced in July that.
“This is 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,” said Dan Ives, an analyst at Wedbush Securities.
Lawyers for Musk didn’t respond to messages seeking comment on Tuesday.
The trial seeking to compel Musk to buy Twitter is set to start in Delaware Chancery Court on Oct. 17. Avoiding a trial “will save a massive legal headache,” Ives added.
Uphill legal battle
Musk’s argument for walking away from the deal has largely rested on the allegation that Twitter misrepresented how it measures the magnitude of “spam bot” accounts that are useless to advertisers. But most legal experts believed he faced an uphill battle in convincing Chancellor Kathaleen St. Jude McCormick, the court’s head judge, that something changed since the April merger agreement that justifies terminating the deal.
Legal experts generally have said that Twitter had the upper hand in the lawsuit, which Twitter filed in July. Twitter is seeking “specific performance” of the contract with Musk, which means he would have to go through with the purchase at the original price. The contract Musk signed also has a $1 billion breakup fee.
Among the remedies that would favor Twitter is a court order to go through with the deal. The Chancery Court last year forced private equity firm Kohlberg & Co. to go through with its $550 million buyout of DecoPac, a company based in Minnesota that calls itself the world’s largest supplier of cake decorating supplies to professional decorators and bakeries. The case was emblematic of the court’s common — though not uniform — resolution of enforcing contractual obligations on buyers.
Other options include Musk being forced to pay the breakup fee each side agreed to if deemed responsible for the deal falling through. Or he might have to pay off a larger amount without actually buying the company for $44 billion.
Legal experts have said that Delaware courts have been picky about interpreting what counts as a valid reason for backing off of a deal. The gap between what Musk knew about Twitter when he made the offer in April and the state of the company today had to be huge, and there’s little evidence of that, one lawyer said.