Twitter’s strategy may be storing up trouble for the company. After the insults thrown by both sides, things will be awkward if Twitter’s leaders succeed in forcing Musk to take over.
The other two outcomes, which are together much more likely, Ives says, would see Musk either buy Twitter for the agreed $44 billion, or walk away after reaching a settlement in which he pays the company damages of between $5 billion and $10 billion. “The stock is factoring in some significant chance that Musk will ultimately have to pay Twitter a major settlement well north of $1 billion, and possibly still have to buy the company at the agreed upon price,” Ives says.
How does a business deal agreed by both sides and backed by some of the world’s largest banks turn into such a mess? Javier Marcos Cuevas, associate professor at Cranfield School of Management, describes the process that got Twitter here as an “escalation of commitment,” which forced both Musk and Twitter to flip their initial positions.
On Twitter’s side, Marcos Cuevas believes the company’s leadership went from believing the company merited a high price, to no longer believing it can sell the company at all. That reversal makes it worth trying to force Musk to complete the deal, securing the high price offered or forcing payment of significant damages.
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