Elon Musk’s Twitter Deal
Elon Musk has apparently reversed his earlier decision and now wants to acquire Twitter. This, after all the suspenseful months! A new SEC filing revealed his intentions, albeit Twitter would have to withdraw its case for this to happen. Please don’t feel silly for having so many questions about this; we have them, too. Now, let’s get down to business.
So, how did we ever get here in the first place?
It all began in April of 2022 when Musk revealed he had acquired a 9.2 percent interest in Twitter. Twitter quickly extended an offer for Musk to join the board of directors, which he accepted before rescinding it a week later.
Is there a specific event or realization that prompted this about-face? By remaining on the board, Musk would be limited to 14.9% ownership. He implied he would have been forced to give up his favorite activity if he had stopped tweeting about how terrible Twitter is. Musk came up with the ingenious idea of purchasing all of Twitter for $44 billion to solve this problem.
The situation deteriorated rapidly after that. Musk quickly claimed that Twitter had not given him enough information regarding the volume of spam bots on the service and that this was sufficient cause for him to walk out of the arrangement. Understandably offended, Twitter countered by filing a lawsuit against Musk, demanding that he complete the transaction.
The court date between Twitter and Musk was planned for October 17th, but in true Musk manner, he decided on Tuesday that he would go through with his deal to buy Twitter for $54.20 a share if the judge handling the lawsuit deferred the case.
So, why does Musk not want to back out of the contract now?
We can’t read Musk’s mind to know for sure (and aren’t sure we want to), but there are a few variables that could have swayed his decision.
The embarrassing text conversations showing how the transaction disintegrated and how Musk changed from being excited about investing in Twitter to claiming the only way to repair it was to take it over were first discovered during the pretrial discovery process.
It’s possible Musk realizes the trial could turn out to be a shambles. What’s more, it doesn’t help that Musk’s argument against Twitter is predicated on spreading negative information about the very firm he may acquire.
The only public comment from Musk thus far is a tweet in which he claims that the acquisition of Twitter represents the beginning of the process of developing X, the everything app. Musk previously stated his intention to transform Twitter-like Chinese messaging app WeChat.
WeChat’s payment features are especially intriguing given that Musk’s co-founded online bank, X.com, was subsequently acquired by PayPal.
Is there any chance that this deal will actually get done?
Who can say for sure? In a Securities and Exchange Commission filing, Musk restated his offer, and Twitter confirmed its intention to “complete the transaction at $54.20 per share.” It’s been saying this basically since Musk announced he wanted out of the deal, so it doesn’t necessarily mean they’re agreeing to the new offer.
Who will own Twitter after the deal?
The obvious response is Elon Musk, but there is more to this story. The SEC filing states that Musk is forming a holding company that will “wholly own” all of Twitter’s publicly traded stock. (There are also a number of additional holding companies involved in the deal, though Twitter will likely absorb most of them.)
Binance, Oracle founder Larry Ellison, Saudi Arabia’s Prince Alwaleed Bin Talal Bin Abdulaziz Al-Saud, and Andreessen Horowitz all have billions invested or tied to this deal, and while Musk won’t have to answer to public shareholders like Twitter has historically had to, they all have a vested interest in seeing this deal succeed. This story from The Wall Street Journal has the full list, along with the total amounts invested by each company. Musk has assured them of a return on their money, and The Washington Post hints that they may also desire input on the platform’s direction.
An ancillary concern is who will be responsible for day-to-day operations of Twitter. A story from earlier this year said that after the acquisition, Musk will temporarily replace CEO Parag Agrawal. Even while Musk hasn’t said anything officially, it seems doubtful that he’ll let Agrawal remain his post, given that the two have been publicly feuding for months and that Musk’s freshly revealed texts reveal his frustration with Twitter’s leadership.
As for Musk’s plans for the future of the firm and the role of CEO, speculation is widespread as to whether he has any plans to resign or who might replace him.
Anything About the October 17th Trial?
There is some uncertainty at the moment. According to Talley, the litigation “is not going to halt dead in its tracks, it will continue,” and he is waiting for a signal from the court as to whether or not she would permit anything to be frozen in time. To paraphrase, “the machinery is still oriented to trial on October 17th,” he added, adding that activities like depositions would continue up until there was an actual deal.
When is it over?
The time frame for the deal’s completion is currently unknown. However, in April 2023, a crucial date will arrive: Musk’s financial agreements will no longer be in effect. He risks having to pay the billion-dollar breakup fee if the deal doesn’t go through or if he doesn’t finish it or renew the agreements by then. What it would imply for Twitter is that it would be a billion dollars richer, which is fantastic, but it would also have to stay a public company and figure out how to move forward after a year of chaos and having its name dragged through the muck.
What other issues could potentially derail the transaction? It seems like anything could happen, given the people involved: Musk might get in trouble with the SEC, Twitter could inadvertently admit to a heinous crime in court, and aliens could invade because SpaceX rocket launches are so loud. What we mean is that nothing is finalized unless everyone involved is satisfied.
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