Billionairefor $44 billion, setting up a high-profile legal battle with the influential social network.
On Friday, Musk’s attorney, Mike Ringler, posted a letter on Twitter saying that Musk had terminated his agreement to buy the company. In the letter, Musk claims that Twitter breached multiple parts of the agreement by failing to provide the billionaire with additional information about the number of fake accounts on its site, as well as other information.
Twitter said it still plans to close the deal. “We are committed to closing the transaction based on the price and terms agreed upon with Mr. Musk and plan to take legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery,” the statement said.
In April, Musk offered to buy Twitter for $54.20 per share, but the social network’s stock price has since fallen. The bid at the time was 38% higher than Twitter’s closing stock price on April 1, when the billionaire disclosed that he owned more than 9% of Twitter. Musk previously said the deal could not move forward until there was evidence that fewer than 5% of Twitter’s 229 million daily users were fake or spam-focused in the first quarter.
Here’s what you need to know about the ongoing saga between Musk and Twitter:
Why is Musk trying to stop the deal?
Musk, who heads Tesla and Space X, said at the TED2022 conference that he doesn’t care about the “economics” of buying Twitter, but he has concerns about the future of Twitter’s business.
The lawsuit, filed by Musk’s attorney, alleges that Twitter breached parts of its contract with Musk, citing data the company allegedly did not provide to the billionaire, including estimates of the social network’s daily users. Twitter makes most of its money from ad sales, so the number of people who can see ads is an important metric for the company.
“This information is fundamental to Twitter’s business and financial performance and is necessary to complete the transactions contemplated by the Merger Agreement, to ensure that Twitter satisfies the closing conditions, to facilitate Mr. Musk’s financing and financial planning for the transaction, and to plan the transition for the business.” to be busy”, the letter says.
The company’s stock price has fallen since Musk’s deal with Twitter, amid fears of a potential recession. Twitter has fired key executives, frozen hiring and laid off about 30% of its talent acquisition team.
Why did Musk want to buy Twitter in the first place?
Musk is an avid user of the service, but also one of its most vocal critics.
In March, Musk polled his Twitter followers asking whether users believed Twitter protected free speech. He said the results of the poll, in which nearly 70% of the 2 million respondents said no, would be “very important”.
“Given that Twitter serves as a de facto public town square, failure to adhere to free speech principles undermines democracy. What should be done?” Musk said in his next tweet. He then proposed to buy Twitter, noting that he believed Twitter needed to be private in order to achieve its goal.
The US Constitution’s First Amendment guarantee of free speech applies to government censorship of speech, but not to companies like Twitter. Rules about what is not allowed on their sites.
Musk again invoked freedom of speech when Twitter announced the deal in April. He also said he wanted to improve Twitter with new features and promised to open source the service’s algorithms, defeat spam bots and authenticate all people.
“Twitter has huge potential,” Musk wrote. “I look forward to working with the company and the user community to unlock it.”
Progressives criticize social media companies for failing to crack down on harmful content such as hate speech and harassment. Conservatives claim their speech is censored. (Twitter has long denied allegations that it censors conservatives.)
On April 19 Musk tweeted he thinks social media politics “would be better if the extreme 10% on the right and the left were equally unhappy.” He also said he would lift the ban After the January 6 riots on Capitol Hill, he was kicked off the platform for fear of inciting violence. Trump said he has no plans to return to Twitter even if the company lifts the ban.
What was Twitter’s response?
Twitter believes closing the deal is in the best interests of shareholders.
At first, it looked like Twitter would reject the offer, but when Musk offered details on how he would finance the deal, the board began to take it more seriously. The company had adopted a defensive strategy known as a “poison pill” that would make it difficult for Musk to add to his stake in the company. This tactic allowed Twitter to accept a competing offer if it emerged.
Co-founder of Twitter Jack Dorsey On April 15, he wrote on Twitter that “as a public company, twitter has always been ‘for sale’. That’s the real issue.” As a public company, Twitter has dealt with leadership changes, layoffs, and activist investors. After Twitter announced the deal, Dorsey never said anything. said he doesn’t believe who should own or run Twitter, but that taking it back from Wall Street is “the right first step.”
“Elon solving the problem of this being a company is the only solution I trust,” Dorsey tweeted. “I believe in his mission to extend the light of consciousness.”
A filing with the US Securities and Exchange Commission also sheds more light on how the deal came together. In March, Musk spoke with Twitter co-founder Jack Dorsey about the future of social media and the decentralization of social media to give users more control over their data and the content they see.
Musk’s attempt to acquire Twitter failed. Musk turned down a seat on Twitter’s board before proposing to take the company private. Musk also spoke with Dorsey in early April, and Dorsey said he thought publicly traded Twitter would be better off as a private company.
How did Musk plan to pay for Twitter?
Even for Musk, who is worth an estimated $220 billion, buying Twitter requires some financial juggling.
In an initial filing with the SEC on April 20, Musk said he personally committed $21 billion in equity financing. It also secured approximately $25.5 billion in debt financing through Morgan Stanley and other financial institutions.
Since then, Musk has raised capital by selling $8.5 billion in Tesla stock, likely for the deal, and raised $7.1 billion from outside investors. Those investors include Sequoia Capital and Oracle co-founder Larry Ellison, according to reports on May 4. (Ellison sits on Tesla’s board of directors.) Saudi Arabian investor Prince Alwaleed bin Talal Bin Abdulaziz Alsaud also agreed to pledge about 35 million shares in the deal.
On May 24, Musk promised more involvement in the deal. Now it is willing to put up $33.5 billion for the acquisition.
What will happen next?
Twitter said it plans to take legal action to enforce its agreement with Musk. According to an April 25 filing by the SEC, canceling the deal could cost Musk as much as $1 billion in termination fees that are part of the deal.
The deal also had to be approved by Twitter shareholders at a special meeting. No date has yet been given for the meeting. Bloomberg said the vote will be held in late July or early August.
Wedbush Securities analyst Daniel Ives said in a tweet Friday that Musk’s move is “a disaster scenario for Twitter and its Board, as the company will now fight Musk in an extended court battle to get the contract back.”