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Elon Musk faces paying billions of dollars after backing out of Twitter deal, expert says

Business Insider US
Elon Musk could face paying billions after walking away from the Twitter deal.
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  • Elon Musk may be on the hook for billions after abandoning his Twitter deal, an NYU professor said.
  • Musk walked away from the deal Friday, blaming its failure to disclose the number of fake accounts.
  • Experts told Reuters that Twitter may try to negotiate a lower price with the Tesla CEO.
  • For more stories go to www.BusinessInsider.co.za 

Elon Musk could face paying out billions of dollars after walking away from a deal to buy Twitter, an expert has warned.

Scott Galloway of New York University said Musk was unlikely to win the inevitable legal battle with Twitter after walking away from his $44 billion (R740.1 billion) deal on Friday.

He told the Pivot Podcast that Musk may be forced to pay the difference between the R740.1 billion he offered for Twitter and its value now, which stands at about $28 billion (R470.9 billion).

Musk faces a $1 billion (R16.8 billion) break fee for walking away from the deal, but with Twitter's chairman planning extensive legal action, Galloway said that fee was now "moot".

"He owes shareholders $17 billion (R285.9 billion) here … and the stock's probably going to crater at Twitter. This guy could be looking at a $20 billion (R336.4 billion) judgement," Galloway said.

"Anyone with an IQ over 80 who has his ear would have said 'why are you doing this? This makes no sense'."

Musk's lawyers argued in a letter to Twitter that the company had breached its agreement by failing to accurately disclose the number of fake accounts on the platform.

However, Galloway said this was not a justification for abandoning the deal.

He said Musk's commitment to pay $54.20 (R911.72) a share for Twitter occurred in "a month of mania" and that because his "piggy bank" was now 40% smaller following a fall in Tesla shares, he was now using bots as an excuse to walk away.

Musk's net worth has fallen by $65 billion (R1.09 trillion) since he announced the Twitter takeover in April with Tesla stock losing about a quarter of its value during that time.

A group of legal experts told Reuters on Saturday that Twitter has the edge in its dispute with Musk, but the company was more likely to try to negotiate a lower sum. 

"The argument for settling at something lower is that litigation is expensive," said Adam Badawi, a law professor at UC Berkeley, told Reuters. "And this thing is so messy that it might not be worth it."

Dan Ives, an analyst at Wedbush Securities, now valued Twitter at $30 (R504.64) per share, meaning the company is worth $23 billion (R386.8 billion), or $21 billion (R353.2 million) less than Musk agreed to pay. 

"For Twitter, being in a 'Game of Thrones court battle' with the richest person in the world is far from the vision the company (and its board) saw in April," he wrote in a note to clients.

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