Shareholders of Twitter Inc approved a $44 billion buyout by Elon Musk on Tuesday, handing the outcome of the deal to a court battle in which the billionaire is trying to scrap the buyout.
Twitter’s lawyers said in a letter Monday that the billionaire’s attempt to withdraw is “invalid and misguided” and that “Twitter has not breached any of its representations or obligations,” according to a regulatory filing. Musk has said Twitter should have given him notice before spending $7.75 million on a separation deal with Peiter Zatko, the company’s former chief security officer, who has raised concerns about lack of security, privacy issues and the number of “bots” on the platform.
Musk previously raised concerns about the number of bot accounts on the platform, as well as the company’s hiring and firing decisions, arguing that purchase agreement violations should allow him to withdraw his offer. Twitter investors are unlikely to accept Musk’s offer and on October 1. The court case on the 17th to decide whether to go ahead with its offer is still ongoing.
“The shareholder approval expected tomorrow formally sets the stage for the Game of Thrones Battle between Musk and Twitter in Delaware court with the high possibility, in our view, of some form of negotiation.” , before the October trial, analysts at Wedbush Securities. Daniel Ives and John Katsingris wrote in a note.
Musk decided in April that he wanted to own Twitter, but since then the gap between Twitter shares and the $54.20 offer price has widened, indicating skepticism about the deal. Meanwhile, the social network implemented a hiring freeze as it struggled to sell ads and shares took a hit from a broader market downturn.
The San Francisco-based company has denied Musk’s claims about spam bots. The agreement included a provision that, if broken, the party that broke the agreement would pay a $1 billion termination fee, under certain circumstances.
“While this allegation is stronger than Musk’s previous hire-and-fire claims, only ‘material’ violations allow Musk to walk away,” Matthew Schettenhelm, a Bloomberg Intelligence litigation analyst, said in a note. “And we doubt that a $7.75 million severance package would qualify, even if Twitter can’t show that it traces its past practice.”