Elon Musk is the richest man in the world with a net worth of over 200 billion dollars. Recently, he called off his deal with Twitter, a social networking service, after taunting the company’s board to express his unhappiness, claiming that the company made false representations and was hiding things behind his back.
Back in Late January, Musk started to quietly build his stake (a financial involvement in a business) in the company without the public knowing. Later, he began to tweet statements like, “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?” with the options for users to vote “yes” or “no.”
In early April, Twitter’s board and leadership team discussed the prospect of Elon Musk joining the board. The next day, Musk became the company’s largest shareholder. With more than 9% stake of the company in Musk’s hands, Twitter soared more than 20% in shares and early trading.
Twitter then offered board membership to Musk, with CEO Parag Agrawal saying that Elon would bring great value to the board. Ironically, Musk decided to not join the board after trying for several months to build his stake. Instead, a few days later, Musk offered to buy Twitter completely for $44 billion, stating that “Twitter has extraordinary potential. I will unlock it.”
His initial plan was to turn Twitter into a privately owned company that promotes free speech and meant more for the future of civilization instead of a money machine. Musk also would reverse the ban on former President Donald Trump because he thought the ban was unfair and a foolish decision.
On April 25th, Twitter agreed to Musk’s offer of $44 billion. Musk raised funds to buy Twitter by selling almost $9 billion of his Tesla stock. He also got $7 billion from other investors, which is already about 36% of the $44 billion that Musk needs.
In the middle of May, Musk started to get skeptical and question if Twitter had provided him the correct information on spam/fake accounts. Musk even responded to Agrawal’s post of how the company confronts spam accounts with a poop emoji.
In June, Musk’s lawyers wrote a lengthy letter to Twitter demanding more information about how Twitter counted its fake and spam accounts. The letter also included a threat that the lack of information gave Elon Musk the right to terminate the agreement and to not continue with the deal. Musk and his team tested out the numbers and picked 100 as the sample size number believing that Twitter also used it to calculate the number of bot accounts on Twitter.
As Elon Musk revealed to the world about Twitter’s lack of financial possibilities of the future, Twitter’s stock plummeted 30%. Musk was making fun of Twitter’s policies and its top executives. The New York Times says, “He is inexorably leaving Twitter worse off than it was when he said he would buy it. With each needling tweet and public taunt, Mr. Musk has eroded trust in the social media company… and spread misinformation about how Twitter operates.”
Now, Musk is trying to back out of the deal. The letter that a lawyer who represented Musk wrote included, “For nearly two months, Mr. Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform. Twitter has failed or refused to provide this information.”
Twitter now wants to sue Musk to force him to complete the deal. There is no prediction of who will win the case. Elon Musk expressed his distaste by posting an edited picture on Twitter a few weeks ago. The picture was a sign that no matter in court or outside court, Twitter would still have to reveal the accurate amount of bot and spam accounts.
Both sides of the issue have spent countless hours on this deal. Twitter cannot just let Musk walk away without court because the deal has done “significant damage” to Twitter’s reputation. The Washington Post expects the company’s stock price to drop even further if Musk walks away completely.
The New York Times says, “The court battle is likely to be protracted and immense, involving months of expensive litigation and high-stakes negotiations by elite lawyers.” The end result of the deal is hard to predict; Musk will be forced to compete the deal, Musk can walk away, or both sides could renegotiate.
Sources:
(1) https://s3.amazonaws.com/appforest_uf/f1658069937348x173603191368131070/Why%20Elon%20Musk%20can%E2%80%99t%20get%20out%20of%20buying%20Twitter%20even%20if%20his%20bankers%20bail%20-%20The%20Washington%20Post.pdf
(2) https://www.cnn.com/2022/05/17/tech/twitter-elon-musk-timeline/index.html
(3) https://www.nytimes.com/2022/07/11/technology/elon-musk-twitter-damaged.html?name=styln-elon-musk&region=TOP_BANNER&block=storyline_menu_recirc&action=click&pgtype=Article&variant=show&is_new=false
Back in Late January, Musk started to quietly build his stake (a financial involvement in a business) in the company without the public knowing. Later, he began to tweet statements like, “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?” with the options for users to vote “yes” or “no.”
In early April, Twitter’s board and leadership team discussed the prospect of Elon Musk joining the board. The next day, Musk became the company’s largest shareholder. With more than 9% stake of the company in Musk’s hands, Twitter soared more than 20% in shares and early trading.
Twitter then offered board membership to Musk, with CEO Parag Agrawal saying that Elon would bring great value to the board. Ironically, Musk decided to not join the board after trying for several months to build his stake. Instead, a few days later, Musk offered to buy Twitter completely for $44 billion, stating that “Twitter has extraordinary potential. I will unlock it.”
His initial plan was to turn Twitter into a privately owned company that promotes free speech and meant more for the future of civilization instead of a money machine. Musk also would reverse the ban on former President Donald Trump because he thought the ban was unfair and a foolish decision.
On April 25th, Twitter agreed to Musk’s offer of $44 billion. Musk raised funds to buy Twitter by selling almost $9 billion of his Tesla stock. He also got $7 billion from other investors, which is already about 36% of the $44 billion that Musk needs.
In the middle of May, Musk started to get skeptical and question if Twitter had provided him the correct information on spam/fake accounts. Musk even responded to Agrawal’s post of how the company confronts spam accounts with a poop emoji.
In June, Musk’s lawyers wrote a lengthy letter to Twitter demanding more information about how Twitter counted its fake and spam accounts. The letter also included a threat that the lack of information gave Elon Musk the right to terminate the agreement and to not continue with the deal. Musk and his team tested out the numbers and picked 100 as the sample size number believing that Twitter also used it to calculate the number of bot accounts on Twitter.
As Elon Musk revealed to the world about Twitter’s lack of financial possibilities of the future, Twitter’s stock plummeted 30%. Musk was making fun of Twitter’s policies and its top executives. The New York Times says, “He is inexorably leaving Twitter worse off than it was when he said he would buy it. With each needling tweet and public taunt, Mr. Musk has eroded trust in the social media company… and spread misinformation about how Twitter operates.”
Now, Musk is trying to back out of the deal. The letter that a lawyer who represented Musk wrote included, “For nearly two months, Mr. Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform. Twitter has failed or refused to provide this information.”
Twitter now wants to sue Musk to force him to complete the deal. There is no prediction of who will win the case. Elon Musk expressed his distaste by posting an edited picture on Twitter a few weeks ago. The picture was a sign that no matter in court or outside court, Twitter would still have to reveal the accurate amount of bot and spam accounts.
Both sides of the issue have spent countless hours on this deal. Twitter cannot just let Musk walk away without court because the deal has done “significant damage” to Twitter’s reputation. The Washington Post expects the company’s stock price to drop even further if Musk walks away completely.
The New York Times says, “The court battle is likely to be protracted and immense, involving months of expensive litigation and high-stakes negotiations by elite lawyers.” The end result of the deal is hard to predict; Musk will be forced to compete the deal, Musk can walk away, or both sides could renegotiate.
Sources:
(1) https://s3.amazonaws.com/appforest_uf/f1658069937348x173603191368131070/Why%20Elon%20Musk%20can%E2%80%99t%20get%20out%20of%20buying%20Twitter%20even%20if%20his%20bankers%20bail%20-%20The%20Washington%20Post.pdf
(2) https://www.cnn.com/2022/05/17/tech/twitter-elon-musk-timeline/index.html
(3) https://www.nytimes.com/2022/07/11/technology/elon-musk-twitter-damaged.html?name=styln-elon-musk&region=TOP_BANNER&block=storyline_menu_recirc&action=click&pgtype=Article&variant=show&is_new=false
