According to previous reports, Elon Musk can withdraw from the twitter acquisition by paying a $1 billion "breakup fee", but it's not that simple. Musk tweeted on Friday that the deal to buy twitter was suspended because he needed to find out whether the fake / spam account on twitter was less than 5% as the company had long claimed. The move triggered speculation that he might withdraw from the transaction, leading to a sharp drop of nearly 10% in Twitter's share price on Friday. Subsequently, musk reiterated that he was still committed to completing the transaction.
Musk and twitter reached an agreement last month to pay a so-called "reverse breakup fee" of $1 billion if he failed to complete the transaction. However, this "breakup fee" is not enough for musk to withdraw from the transaction without consequences. The "reverse breakup fee" paid by the buyer to the acquisition target applies to external reasons that the transaction cannot be completed, such as regulatory mediation or third-party financing concerns. In case of fraud, the buyer can also leave, provided that the discovery of incorrect information will have the so-called "significant adverse effect". According to a senior M & a lawyer familiar with the deal, the decline in the stock market, such as the current selling tide, which has led to the loss of more than $9 billion in the market value of twitter, will not be a legitimate reason for musk to give up the acquisition, regardless of whether he has paid the breakup fee or not.
The lawyer said that if musk gave up the acquisition simply because he felt he was overpaying, twitter could sue him for billions of dollars in damages and an additional $1 billion in breakup fees. This has happened before. For example, Tiffany sued Louis Vuitton, a French luxury group, in 2020 because the latter tried to withdraw from the agreement. Subsequently, Tiffany agreed to reduce the selling price from $16.2 billion to about $15.8 billion, and the lawsuit was settled.