After trying to cancel a $44 million deal to buy the company, the billionaire made a surprise move.
The drama and scale of the months-long battle to get Twitter bought by Elon Musk were immense. It is one of the most significant deals in the tech industry and has captured the imagination of the public with cinematic twists that have been closely watched even by people who have never tweeted.
In a surprising move, Musk has added yet another twist to his plot. The billionaire proposed Monday night, after months of trying to end a contract he signed in April.
According to Tuesday’s regulatory filings, Musk stated that he would do exactly the same thing he promised in April: Buy Twitter for $54.20 per Share.
Twitter sued Mr. Musk in July for forcing him to sign the $44 Billion deal. He has not yet accepted his proposal and intends to add conditions to make sure he does not change his mind.
Twitter stated that it had received the letter from Mr. Musk and reiterated its intention to close the deal. According to three people familiar, Twitter could ask Delaware’s court for protections to force Musk to accept his proposal. One of those people said that the company could demand Mr. Musk to pay interest on the deal price in exchange for delays in the acquisition.
The agreement would have allowed both sides to avoid a chaotic trial, which was due to begin in Delaware Chancery Court in two weeks. Most likely, the trial would have included testimony from Musk, who is responsible for electric carmaker Tesla, as well as senior executives at Twitter. According to a legal filing, Mr. Musk will be deposed in Austin, Texas on Thursday and Friday.
Twitter is now smaller than other social media platforms, such as Facebook and TikTok. Twitter has been barely profitable for much of its history. The fight with Musk has been a major topic of Silicon Valley, Wall Street, and Washington. Twitter has long been a bullhorn for opinionated tech billionaires like Mr. Musk, and politicians like former President Donald J. Trump. It was removed from its platform last January following the Jan. 6 riots on Capitol Hill.
One of Mr. Musk’s first moves could be to allow Mr. Trump back on Twitter if he does take control. It was a “mistake”, according to Mr. Musk, for Twitter to ban Mr. Trump.
This potential agreement comes after months of disputes that have caused existential problems for Twitter. They have cratered its share price, demoralized its employees, and scared the advertisers it depends on for revenue.
With his frequent, harsh criticisms of Twitter and its management, Musk has often appeared more interested in destroying the company than in becoming its new owner. Critics have suggested that Musk was simply looking for any excuse to back out of a decision he regrets.
Ann Lipton, Tulane Law School professor of corporate governance, said that he “recognized that litigation is not going well for him”.
Twitter would win if the deal was done at the original price. In July, Mr. Musk stated that he would not continue with the acquisition as he felt Twitter was being overrun by spam. Twitter sued him shortly thereafter.
On Monday night, Mr. Musk sent his latest proposal to Twitter to inform the company that he intends to continue with his original offer. According to a regulatory filing, a lawyer for Musk wrote that “We write to inform you that the Musk party intends to proceed to close the transaction.” The letter requested that the court battle be stopped until the closing of the deal.
Kathaleen McCormick was the judge in charge of the trial and the two parties met in court on Tuesday for an emergency virtual hearing to discuss the proposal. Bloomberg reported the proposal earlier.
According to a person familiar with the matter, lawyers for Mr. Musk as well as Twitter are expected to meet in court again Tuesday to discuss the next steps. A deal could close in weeks if they decide to sell Twitter. Or, Mr. Musk can hand over the $44 billion.
Three people familiar with the matter suggested that Twitter could ask Mr. Musk to allow the court to supervise the closing of the deal. One source said that the company could also request Mr. Musk to pay a daily fee for each day since Sept. 13 when shareholders approved the deal.
Brian J.M. stated that Twitter had done all it needed to close the deal “Procedurally,” Quinn is a professor at Boston College Law School. Quinn stated that if the company accepts Mr. Musk’s proposal, it may request that the trial is postponed until the deal has been completed. Twitter will most likely drop its lawsuit against Musk once the acquisition is complete.
Musk tweeted Tuesday evening that “buying Twitter is an accelerant for creating X, the everything app.” X refers to the holding company Musk created to purchase Twitter.
After Mr. Musk’s latest offer was announced, shares in the social media company surged by more than 12 percent. Trading then halted. Trading resumed in the afternoon and Twitter’s share price closed at $52, an increase of 22 percent.
Since Musk’s announcement last spring of his intention to buy Twitter, the economic landscape has changed dramatically. Investors are now facing losses that they haven’t experienced since 2009, amid inflation and geopolitical uncertainty. It has made it harder to finance deals.
Morgan Stanley and other investment banks have already committed to financing the deal, which will involve $13 billion of debt. According to their contract, the banks will remain in default until April.
Musk stated that he would finance the remainder of the deal with cash. To help finance the deal, he purchased approximately $8.5 billion worth of Tesla shares; in May, he stated that he had secured $7 billion from a variety of investors, including Andreessen Horowitz, the venture capital firm, and Larry Ellison, the tech mogul. It wasn’t immediately clear which commitments these investors made to Musk.
He wrote that Mr. Musk had sold $7 billion more of Tesla stock in August. This was “the (hopefully unfavorable) event that Twitter forces this deal to close and some Equity Partners don’t come through.”
Four employees from Twitter said that they learned about Mr. Musk’s plan through media reports. They were participating in a companywide meeting on Tuesday about corporate plans for 2023, reviving confusion and speculation which have plagued Twitter’s workforce over the past six months.
Parag Agrawal (Twitter’s chief executive) did not respond to Mr. Musk’s offer to employees immediately, these people said. Twitter’s general counsel Sean Edgett said Tuesday afternoon in an email to employees, “I will continue keeping you updated on significant updates, but in the meantime, thanks for your patience while we work through this legal side.”
Employees discussed on Tuesday the implications of the company’s decision to terminate Musk’s offer. They also discussed their job security and stock compensation. Some wondered what would happen to Mr. Musk’s offer to Twitter’s board, in a channel that has nearly 2000 members and is used for jokes about company news. Many speculated that Twitter’s stock might plummet while another, referring specifically to Mr. Musk, stated that the company wouldn’t have to be owned “by a moron.”
Although an agreement would signal an end to the uncertainty that was clouding Twitter’s immediate prospects, Musk’s plans for the company remain unclear. Before trying to cancel the deal, Musk told investors that he could bring the company to 500m daily users by 2025 and generate $13.2 billion in revenue.
Twitter and Mr. Musk were scheduled to meet in court this month in Delaware. In legal filings, the company claimed that Mr. Musk had abandoned the deal because of smokescreens and that he simply wanted a lower price since stock market declines have reduced his wealth.
Musk stated that Twitter had probably undercounted spam usage, which made the company less valuable than Musk initially thought. As a reason for exiting the deal, he also mentioned whistleblower claims by a former Twitter executive who claimed that the company had misled regulators regarding its security practices.