In April, Elon Musk— famous for Telsa and SpaceX—shocked the world when he announced his intentions to buy Twitter for $44 billion. Twitter agreed to this decision, but shortly after, Musk got cold feet and attempted to back out of the agreement.
But on October 27, the deal was closed, and Musk became the new and sole owner of Twitter. As a result of the consummation of the deal, there have been many changes that we will cover in this article.
The key takeaway: business can be unpredictable, even for the wealthiest person in the world. This is why you need a team of attorneys by your side to navigate every step of the process legally. Contact The Frazer Firm at (561) 295-1551.
A Recap of the Buyout
Less than three months after Musk announced his offer to buy Twitter, he tried to back out of his deal. Despite his attempts, Musk is now the owner of Twitter; what happened during the process?
Twitter’s position was that Musk’s offer to purchase the company and then intentionally delay it was detrimental to the company’s valuation. As such, they sued Musk for specific performance of the deal, arguing that he violated his commitment to buy the company. Musk, on the other hand, argued that he should be permitted to walk away from the deal because Twitter did not fully disclose material information, including details about the amount of spam and bots on the Twitter platform.
Twitter pursued the court case while Musk attempted to renegotiate the original purchase price. Just days before the case was to be sent to court for a five-day trial, the parties resolved the dispute and consummated the deal.
What Happens Now That Twitter is Private?
As the new owner, Musk took Twitter private, which means Twitter’s stock is no longer trading on the New York Stock Exchange. Shareholders received $54.20 per share at the time of the transaction, which is equal to the purchase price of $44 billion.
By taking Twitter private, there are a few advantages for Musk. For instance, Twitter will no longer have to publicly disclose its quarterly performances, there is less regulatory scrutiny, and as an owner Musk can make all the rules and decisions himself – without needing approval from any other shareholders.
The Potential Legal Implications of Musk’s Buyout
As soon as Musk took charge of Twitter, he quickly fired multiple top executives. He also laid off 50-75% of the workforce. A class action suit has been filed in San Francisco court and questions his compliance under the federal law WARN (Worker Adjustment and Retraining Notification). This federal law requires businesses with 100 or more employees to provide at least 60 days’ notice before engaging in mass layoffs.
In response, Twitter has filed a motion to compel arbitration of the employees’ claims pursuant to the terms of their employment agreement. Additionally, Musk has tweeted (of course), that “everyone exited was offered three months of severance, which is 50% more than legally required.”
Musk has communicated with the remaining Twitter staff his vision for Twitter 2.0 and explained he requires an “extremely hardcore” culture with long hours and high intensity – a perfectly acceptable, and expected mandate from the new owner. If employees do not agree to this, they can leave with three months of severance pay.
Contact The Frazer Firm for a Consultation Today
The evolution of Twitter as a business is far from over, though we can learn a lot from the decisions made thus far. From the initial offer, to the acquisition, to employment decisions, business owners and executives need to be sure their legal counsel and a team of other professionals are providing the necessary peace of mind that business decisions are financially advantageous and legally compliant for the business.
If you are interested in acquiring or selling a business, ensure you are guided by knowledgeable and experienced business attorneys and other professionals. Contact The Frazer Firm in Jupiter, Florida at (561) 295-1551 to discuss your business and legal needs.
MAY 2023 UPDATE:
Elon Musk, the owner of Twitter, recently chose Linda Yaccarino, a seasoned player in the advertising industry and former NBCUniversal’s advertising chief, as Twitter’s new CEO. This appointment signals Musk’s focus on enhancing Twitter’s advertising business, which has been struggling, particularly after Musk’s previous actions had unsettled advertisers.
Yaccarino, while having to deal with Twitter’s advertising challenges, will also need to manage the company’s operational issues, having seen a significant reduction in its workforce and grappling with technical difficulties. Furthermore, she’ll need to navigate working with Musk, known for his unpredictable management style. Despite potential challenges, both Musk and Yaccarino share optimistic views about the future of Twitter, with ambitious plans for expanding its features and growing its value.
Yaccarino’s experience and strategic approach to advertising, along with her alignment with Musk’s stance on free speech, could potentially drive significant transformation for the platform, marking a new era for Twitter.
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