In April, Tesla CEO Elon Musk made a $44 billion offer to buy Twitter. A month later, he put the deal ‘on hold’, before tweeting that he ‘remains committed’ to the deal.
In July, he changed his mind again, saying that he is terminating the deal. But, billion-dollar acquisition offers are by definition a binding commitment.
Once again, the public has front-row seats as Twitter and Musk poke holes in the disagreements that lie at the centre of this purchase debacle.
What happened so far
After initial resistance over a hostile takeover, Musk lined up $46.5 billion in financing for the deal, which the Twitter board accepted. Musk then sold $8 billion worth of Tesla shares to finance the takeover – all within the span of a month.
The month of May saw the saga take a sour turn: Musk placed the deal on hold calling for a appraisal of Twitter’s spam and fake accounts. Twitter investors then sued Musk for “stock manipulation” during the takeover, claiming that “by delaying the publication of the amount of his stake in Twitter, Musk manipulated the market and bought shares at an artificially low price.”
A month later, Musk threatened to walk away from the buyout deal if Twitter failed to provide data on spam and fake accounts, and in July, he carried out his threat, terminating the deal on the grounds that Twitter breached multiple provisions of the merger agreement.
The latest installment of the Musk-vs-Twitter saga has now seen the social network sue the Tesla chief for reneging on his offer.
In response, Musk has countersued, legally citing his reasons for no longer wanting the company, including that 10 percent of the social network’s daily users who see ads are, in fact, bots.
Here’s what’s been filed ahead of the trial
Musk’s attorneys said: “Twitter was miscounting the number of false and spam accounts on its platform as part of its scheme to mislead investors about the company’s prospects. Twitter is frantically closing the gates on information in a desperate attempt to prevent the Musk parties from uncovering its fraud.”
However, Twitter has accused him of backing out because shares had dropped due to the economic downturn, adding that the “deal no longer serves him.”
Watching this play out is interesting, messy, and quite sordid.
When Musk initially started teasing the acquisition in April, his bravado, or at least his overly transparent tweets on the matter, translated to a perceived power position.
In the lead-up to his offer, he was known to hurl public insults at the company; he discredited the firm’s management, operations, and users.
His proposal to purchase appeared based on a need to prove a point. He could do it better. He would show them how. But unlike Elon Musk, who had his say across tweets, Twitter has been responding where it might count most – in court.
Assertions from Twitter’s court filing
“Musk sought an urgent deal, took no due diligence, and offered a self-described ‘seller-friendly” merger agreement that contained no representations about false or spam accounts.
“As to Musk’s claim that Twitter has played “hide-and-seek,” the truth is the exact opposite – Musk has received a massive amount of information from Twitter for months and has been unable to find a valid excuse to back out of the contract.
“Twitter admits that it offered to meet with Musk on multiple occasions and admits that Musk declined to meet, demonstrating no actual interest in learning about Twitter’s estimation of false or spam account prevalence.”
Musk’s move
Twitter’s court response speaks directly to the issue that Musk seems to rely on the lack of transparent information as the reason for opting out. And the Tesla founder’s failure to attend meetings about the topic undermines his argument.
However, that hasn’t stopped Musk from challenging Twitter CEO Parag Agarwal to a debate.
“Let him prove to the public that Twitter has <5% fake or spam daily users!” Musk said in a tweet.
With the Twitter lawsuit looming in October, Musk sold nearly 8 million of his Tesla shares, worth around $6.88 billion. Asked by a Twitter user whether he would repurchase Tesla shares if the Twitter takeover did not occur, Musk responded “yes.”
But is there merit behind Musk’s claims?
Musk claims that bots can autonomously tweet, retweet, like, follow, unfollow, or DM other accounts.
If the bot count is as grossly underreported as the entrepreneur suggests, then individuals and organizations paying to advertise on the platform will have invested in an audience that, to a material extent, doesn’t exist.
And if fraud is described as deception intended to result in financial gain, then fraud is indeed afoot. And that’s worth investigating.
Independent researchers consistently challenge Twitter’s claim that bot accounts make up less than 5% of daily active users. Their findings suggest that they account for up to 15% instead.
Nobody wins when the family feuds
Three months ago, we observed and deduced with casual certainty that Musk was on his way to outright owning Twitter. It seemed apparent that Elon Musk would get what Elon Musk wanted.
It appeared to be an aggressive takeover. Even if Twitter hadn’t wanted to accept his offer, the damage Musk was doing in undermining the company by posting on their platform to his millions of followers almost seemed to strong-arm them into a position left with little other choices.
Fast forward today, and the tables have turned. He doesn’t want it after all. The fact that Twitter is now heading to court to force him to close on a deal that he insisted on in the first place is all a bit satirical.
But who are the real losers here? The mogul or the user base?
Musk had promised a Twitter free of bots and spam, public algorithms, and the ability to edit posted tweets.
But for Elon? What does it mean to spend $44 billion on something you don’t want when you’re the wealthiest man in the world?
No. The biggest loser is probably Twitter itself. “Twitter now has an acquirer who no longer wants it, a CEO and board who wants to get rid of it, and an employee base which is caught in the middle of it all,” said analyst Mike Proulx.
The mudslinging might be entertaining, but the whole, unbiased circle of justice must prevail.
We should be interested in social networks being transparent and accountable. We should want clear evidence to settle how many bots roam social media.
Let’s see if we get that public debate. The court will decide based on law. But we, the loyal followers, have always played judge and jury in the court of posted opinions.
Briar Prestidge, CEO of Prestidge Group
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