Elon Musk once again occupies a place he loves: at the center of attention and conversation.
The billionaire entrepreneur dropped a bombshell on July 8 by announcing in a Securities and Exchange Commission filing that he was no longer buying Twitter (TWTR) – Get Twitter Inc. Report after nearly three months of a saga rocked by twists and tensions.
In the end, the reason he cites for his withdrawal is not Twitter management’s resistance but the platform’s familiar problem: fake accounts, also known as spam bots.
Twitter has always disclosed in its financial documents that these fake accounts represent perhaps 5% of the total number of users. Musk reckons it’s much more than that; he has accused management of bad faith and says this is a valid reason to break the engagement.
“Mr. Musk is terminating the merger agreement because Twitter is in material breach of multiple provisions of that agreement,” Musk’s lawyers alleged in the filing.
In addition, Twitter “appears to have made false and misleading representations” about fake accounts, the filing alleged.
Big Legal Battle
The number of users is important because it enables advertisers to assess whether promoting their products and services on the site is worthwhile and to determine which platform would allow them to reach the widest possible audience they want to reach.
The story is far from over. Twitter has said that it would take legal action to force the richest man in the world to honor his commitments. The battle would therefore move from the boardroom to the courtroom.
The social network has hired some of the fiercest lawyers to defend its cause. Twitter’s board over the weekend hired the corporate-law and merger specialists Wachtell, Lipton, Rosen & Katz. Twitter is reportedly ready to file suit against Musk early this week in Delaware.
Delaware, corporate home of many companies including Twitter, has experts in business law, or Chancery judges, who hear and decide cases. They may decide to award punitive damages. These same Chancery judges also decide whether a breakup fee should be paid or not.
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If Musk’s effort to buy Twitter fails, he will be required to pay a $1 billion termination fee, the two parties said in a SEC filing posted in late April.
Twitter is also required to pay Musk a similar amount it it walks away from the deal, the filings indicated. Both sides will have the option of walking away if the takeover isn’t completed by Oct. 24.
Musk has hired Quinn Emanuel Urquhart & Sullivan, which successfully defended him against a defamation suit in 2019.
Laughing His Way Through a Meme
The CEO of Tesla and SpaceX seems to be enjoying all the fuss. He just posted a humorous meme that sums up his position well.
The meme includes different images of him laughing, each with a sentence explaining the four main stages of this saga. He didn’t add anything more, seeming to say that everything that needs to be said has been said.
The first image shows Musk laughing because he heard people say: “They said I couldn’t buy Twitter.”
In the second image, Musk laughs more because, it says, Twitter management refused to give him information on the bots. “Then they wouldn’t disclose Bot info,” Musk captured.
In the third photo Musk laughs equally hard when he learns that Twitter wants to force him to acquire the social network: “Now they want to force me to buy Twitter in court.”
And in the fourth photo, Musk seems to be laughing uncontrollably: “Now they have to disclose Bot info in court,” the caption says.
“The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement,” Twitter Chairman Bret Taylor posted on the social network on July 8. “We are confident we will prevail in the Delaware Court of Chancery.”
“Legal drama will be nasty and take many months. … This remains the Everest-like challenge for Twitter management to navigate turbulence,” Wedbush Securities analyst Dan Ives says.