Will Elon Musk’s sexual harassment allegations affect the Twitter acquisition?

According to Insider, SpaceX spent $250,000 on a flight attendant to keep quiet about Elon Musk’s sexual harassment in 2018. Accordingly, the flight attendant, who used to work in the airline’s cabin crew. SpaceX flight crew, accused Musk of inappropriate physical contact, and offered to “give a horse” if the employee performed “arousal massage”.

Immediately, Elon Musk responded that “there is a lot more to this story” but did not go into details and said that the accusations were “completely untrue”. He also said that this was a politically motivated allegation.

Will this allegation affect Elon Musk’s takeover of Twitter?

In fact, Twitter’s board could change its mind on the deal by citing these sexual harassment allegations.

Specifically, the board of directors will emphasize the “Intervention Events” clause, which basically deals with scandals that arise unexpectedly after the agreement is signed.

Or they could use a so-called “adverse effect” clause which means that if the acquirer (in this case Musk) concealed a fact that could significantly affect the ability to close the deal, seller (Twitter) may unilaterally waive the agreement.

“The board can change its proposal,” said Matteo Gatti, a Rutgers University law professor who specializes in corporate litigation. They will weigh the importance of the allegation to maximize shareholder value in the deal. But it’s also possible that they may not do this because Twitter has not received an offer to buy a company at a good price like Elon Musk’s offer. Furthermore, if the board does so, they will have to pay Musk a $1 billion breakup fee.”

However, this allegation may affect shareholders’ voting on the merger issue that will take place on May 25. If the allegation receives too much outrage, shareholders will likely reject the deal, even if the board doesn’t change its proposal.

Recently, Musk confirmed that he would not be doing the deal with an initial offer of $54.2 per share, and emphasized that Twitter was lying when it said that fake or spam accounts took over. less than 5% of users on the platform. Twitter denies this and says the company will not renegotiate, so it looks like the situation is becoming increasingly tense and will require legal intervention. Twitter will be able to sue Musk, alleging that the billionaire is violating the “specific performance” clause in the merger agreement by gratuitously walking away from the agreed-upon $54.2 price.

However, litigation often takes a long time that can last from 3-4 years. Twitter is a public company and its shareholders are often impatient, they certainly won’t wait for a court to decide the company’s future for years as it risks disintegrating in limbo. . What’s more, Twitter was a struggling business before Musk came along, posting only low profits and weak revenue growth over the course of 16 years. That’s why Twitter is said to be “too good” when it comes to Elon Musk’s price.

Meanwhile, Musk won’t be pressured by harsh timing requirements. Billionaires can wait on Twitter, can walk away altogether, or offer a renegotiated agreed-upon price.

“I think there will be some setbacks and eventually the parties will come together to revise the agreement,” said Mark Williamson, a mergers and acquisitions attorney at Lathrop GRP. It’s possible that Twitter’s board and shareholders chose to ignore allegations of misconduct when considering selling the company to Musk but still didn’t get what they wanted.”

Huong Dung (According to Forbes)