Shulou(Shulou.com)11/24 Report--

According to news on Aug. 12, Tesla CEO Elon Musk's planned $44 billion acquisition of Twitter has almost turned into a farce, with the two sides about to go to court in Delaware. Now that both sides are caught in a legal battle, can they find a win-win solution?

In recent days, Musk has revealed that he has sold another $7 billion worth of Tesla shares in case the court forces him to complete the Twitter deal. If the Twitter board could reach a settlement with the fickle billionaire and sell it to a third party at a lower price, it would be better for both Musk and Twitter shareholders.

Musk and Twitter will go to court in October over whether the acquisition can take place. However, it is clearly not in the interest of either side to go through a legal battle. Instead, Mr Musk may pay a hefty "break-up fee" to quit.

Although Musk may be reluctant to pay cash, he still owns nearly 10% of Twitter, which can partly make up for his losses. For example, if Musk pays a "break-up fee" of $5 billion and Twitter pays it to shareholders as a special dividend, which is equivalent to about $6.50 a share, then Musk will receive $475 million of that.

It also helps ease the pain of the rest of the shareholders. In April, Mr Musk made an offer of $54.20 a share, and paying a huge "break-up fee" would make it easier for Twitter's board to accept a new offer of just under $48 a share. True, that's 50% higher than the fair value of $32 a share, but it's less than 1/10 higher than the stock's current trading price.

In addition, Mr Musk has raised $7 billion from equity partners such as Sequoia Capital and Oracle founder Larry Ellison, who may be willing to accept a cheaper deal.

Meanwhile, assuming Musk bought a stake in Twitter in late March, executing the new deal at $48 a share would save him about $560 million.

As a result, even if Musk pays a "break-up fee" of $5 billion, he actually has to pay only $4 billion. But he had previously said that if he did not have to sell the cash of Tesla shares to complete the transaction, he would buy Tesla shares again. Tesla's stake has fallen by more than 1/4 since the beginning of April, so it could represent a huge investment opportunity for him.

It is also better for Twitter to sell to a third-party buyer who is more willing to buy than to renegotiate the deal with Musk, who keeps dragging Twitter's business model into the quagmire. Twitter investors may still be able to abandon Mr Musk and win.

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