Can Musk Pull Out Of The Twitter Deal? More Importantly, Should He?
Tesla and SpaceX CEO Elon Musk is all set to buy Twitter, with the $44 billion deal on the verge of being finalized, but could it fall through at the last moment, and more importantly, should Musk pull out? Musk offered to pay $54.20 per share to buy Twitter, and has since laid out a plan to finance the deal with bank loans and personal equity that includes the sale of his Tesla shares. The Twitter board approved Musk's buyout offer, but not before attempting to adopt a so-called 'poison pill' strategy to thwart the hostile takeover attempt.
The drama started in earnest when Musk bought a 9.2 percent stake in Twitter in early April and then offered to buy out the company outright for $44 billion. Despite the generous offer, the world's richest man knew that Twitter's board of directors might not welcome his buyout proposal and admitted as much in an interview. However, despite the initial reluctance, the Twitter board eventually accepted the offer, and the deal is now in the process of being closed. Both sides, however, have an exit clause, so should Musk activate it and get out of buying Twitter while he still can?
The momentous agreement between Twitter and Elon Musk has an exit clause that allows either party to pull out of the deal even while it is being finalized. However, according to the agreement, a $1 billion 'parent termination fee' will be applied to either party if they choose to pull out of the deal during the finalization process. It means Musk will have to pay Twitter a billion dollars if he suddenly decides not to go ahead with the purchase, and conversely, Twitter will have to pay him the same sum of money if it pulls out of the deal. So while either party can walk away at any moment, it will come at a massive cost. However, analysts claim that the sum is not too high for either Musk or Twitter, which suggests that there's still a chance that the sale might not go through.
Musk insists that he is taking over Twitter to promote free speech, which he felt was being suppressed on the platform due to the company's strict moderation policies against misinformation and hate speech. According to Musk, Twitter has become a de facto town square for the world, and everybody should have their say on the platform, irrespective of how disagreeable their views are. However, many critics and Twitter employees worry that Musk's laissez-faire attitude towards content moderation might let the platform degenerate into a toxic hellscape of disinformation and hate speech.
Despite concerns from naysayers everywhere, free speech is the bedrock of any democracy. Musk promises to allow unrestricted free speech on the platform, and should he be successful in doing that, it would help foster more fervent debates with ideologues and thinkers from all sides being able to speak their mind without the fear of being kicked off the site. Sure, it will also bring in the extremists, the bigots, and the conspiracy theorists, but that shouldn't stop mainstream users from being able to passionately argue their point of view.
While many have expressed concern that Musk will roll back the safety guardrails the company has put in place to prevent hate speech and extremist content, he should simply ignore the doomsday prophets and go ahead with the purchase. He is unlikely to make Twitter a more agreeable place, but that's not his job anyway. As long as Twitter fulfills its destiny as the world's bastion of free speech, Elon Musk will have done his job as the owner of the world's largest micro-blogging platform.
Source: SEC