Elon Musk has changed his mind again: he is doing actually want to buy Twitter. This, after months of drama! He announced his intention in a new request with the Securities and Exchange Commission — but there’s a catch: Twitter must drop its lawsuit.
We understand if you have questions about the whole situation; honestly we do too. So we spoke to some legal experts hoping it would at least give us a chance to provide some answers. Let’s get into it.
First of all, how did we get here?
sigh. This all started after Musk announced that he had bought a 9.2 percent stake in Twitter in April 2022. Twitter promptly offered Musk a seat on the company’s board of directors, an offer Musk initially accepted before changing his mind about a week later.
The reason for the change of heart? Musk could not acquire more than 14.9 percent stake if he remained on the board. He also hinted that he should give up his pastime of tweeting about how Twitter sucks. So Musk’s brilliant solution to this conundrum was to buy all of Twitter in a $44 billion deal.
From there it went downhill. Musk was quick to accuse Twitter of not providing him with enough information about the number of spam bots on the platform, going on to claim that this was reason enough for him to pull out of the deal altogether. Twitter wasn’t (understandably) kind to that, hitting back at Musk with a lawsuit demanding he close the deal.
Twitter and Musk were supposed to fight it out in court on October 17, but in typical Musk fashion, he decided on Tuesday to go through with his deal to buy Twitter anyway for $54.20 a share – if the judge overseeing the trial adjourned the case.
So why doesn’t Musk want to cancel his deal anymore?
We can’t penetrate Musk’s brain to know for sure (and frankly, we’re not sure we would), but there are a few things that could make him change his mind.
First of all, the discovery process before the trial revealed a number of embarrassing text messages showing how the deal imploded and how Elon went from being incentivized to invest in Twitter to saying the only way to fix it was to talk it over. to take.
Musk probably knows things can get messy in the process. As Eric Talley, a law professor at Columbia University, explains: The edgeMusk was likely faced with “a very unpleasant statement” that could potentially yield “extremely inconsistent statements” that could cause even more legal trouble. It also doesn’t help that Musk’s case against Twitter is essentially based on posting bad things about the company he might eventually acquire.
Musk’s only public statement on the matter is a… tweet saying that buying Twitter is the first step to “making X, the everything app.” This is a reference to WeChat in China, a hugely popular app that started out as a messaging service but has since encompassed a host of other features from gaming to social media and shopping. Musk has said in the past that he wants to turn Twitter into WeChat. “You actually live on WeChat in China,” he told Twitter employees in June. “If we can mimic that with Twitter, we’ll be a huge success.”
Interestingly, WeChat also includes payment services — and X.com was the name of the online bank that Musk co-founded and would eventually become PayPal.
Will the deal go through?
Honestly… who knows? Musk has reaffirmed his offer in a filing with the SEC and Twitter has declared that it plans to “close the transaction at $54.20 per share.” That’s more or less been his stance since Elon first said he wanted to get out of the deal, so it’s not necessarily an indication that he’s okay with the new offer.
Ann Lipton, professor of corporate law at Tulane University, said: The edge that “It’s hard to say how much of a commitment” Musk’s application is until his court hearing with Twitter. “But it would be weird for him to file a public file with the SEC if he’s not really interested in a settlement — that would otherwise be serious securities fraud,” she said. (Securities fraud? Musk? I couldn’t imagine.)
If the deal goes through, who will own Twitter?
The obvious answer is Elon Musk, but there is some nuance here. From a legal standpoint, all of Twitter’s publicly traded shares are purchased by a holding company, which is “wholly owned by” Musk, according to the SEC filing. (Several other holding companies are also involved in the deal, but they will mostly end up on Twitter.)
While Musk is not accountable to public shareholders like Twitter has in the past, there are outside companies and people with billions invested in or associated with this deal, including Binance, Oracle founder Larry Ellison, Prince Alwaleed Bin Talal Bin of Saudi Arabia Abdulaziz Alsaud and Andreessen Horowitz. You can see the full list, including how much each entity has invested in this report from The Wall Street Journal. Elon’s promised them a return on their investmentand The Washington Post suggests that they may also want to have some control over the platform itself.
There is also the secondary question of who will actually do that run Twitter day by day. Earlier this year, reports surfaced that Musk would do that temporarily in charge of the company after the acquisition, supplant current CEO Parag Agrawal. While Musk has not publicly said what will happen, it seems unlikely that he will let Agrawal keep his position; the two have been fighting in public for months, and Musk’s recently published lyrics show he was frustrated with Twitter’s leadership.
Whether Musk still plans to act as the company’s CEO, or who he plans to take his place, is really a guess.
Wait… what about the October 17 trial?
It’s kind of up in the air now. Talley said the lawsuit “will not stop, it will continue,” and that he would expect the judge to indicate whether she will allow anything to be frozen in time. “The machine is still set to go on trial on October 17,” he said, adding that things like depositions will continue until a deal is actually in place.
Didn’t Musk say he wants to drop the lawsuit?
Well, but Twitter would have to agree – and Tilley doesn’t think it will unless the deal is finally closed around October 17, because it doesn’t want to be that way Charlie Brown kicks the football. “I highly doubt they would agree to just stay all. On that note, neither would the Chancellor, who has structured her schedule around the trial date set months ago,” he said.
He did note that “one or two items may be delayed by a few days,” including Musk’s statement, but that “team Twitter should pretty much continue planning as if this trial is going to happen.” He added that the impending trial would also serve as a stick to prevent Musk from delaying his settlement efforts.
The Wall Street Journal reports that the judge has asked Musk and Twitter to come up with a plan that will halt the trial by the end of the day, but we’ll have to wait and see if anything comes of that.
When will this all end?
At this point, it’s completely unclear how long it will be before the deal actually closes. However, there is an important deadline in April 2023, when Musk’s funding deals expire. If he doesn’t close the deal or renew those agreements by then, the whole thing may fail — potentially snagging him for the billion-dollar rescission fee. What that would mean for Twitter… well it would be a billion dollars richer, which is nice, but it should also remain a publicly traded company and figure out how to move forward after a year of chaos and get its name in the mud to tow.
As for the other things that could blow the deal, given who we’re dealing with, it feels like anything could happen; Musk could inflict the ire of the SEC, Twitter could accidentally admit something terrible in court, aliens invade because SpaceX was very noisy with its rocket launches. What we’re trying to say is this deal isn’t over until it’s over.
With additional reporting by Elizabeth Lopatto
Update, Wednesday, October 5, 4:20 AM ET: Story updated with Musk’s “everything app” tweet.