Elon Musk has formally withdrawn his offer to buy Twitter and the social network is now threatening to sue him.
Because Elon Musk doesn’t want Twitter anymore
Elon Musk had announced that he had big ambitions for Twitter, explaining that he believed that the social network was currently operating well below its real potential. Recently, on the occasion of a meeting with the employees of the company, Musk had explained that he wanted to make Twitter a little more like TikTok and WeChat , the Chinese super-app that incorporates a huge plurality of services within a single platform. .
In the meantime, many things have changed. The stock market has collapsed, and tech companies are in particular trouble. Compared to when Elon Musk presented his purchase proposal, Twitter’s shares have plummeted by 20% .
Thus, Elon Musk’s enthusiasm died out very quickly. What was supposed to be a (relatively) friendly takeover has turned into one of the most ramshackle and erratic deals in the history of publicly traded companies. Musk has started publicly attacking the executives of the company he intended to buy, accusing them of hindering freedom of expression.
Then he raised the issue of bots, the quirk he now intends to use to justify the withdrawal of his offer. How many inauthentic Twitter profiles are there? According to the company, they are just 5%. For Elon Musk there are many more. For some experts it might even be three times that. And actually, just take a ride on the social network to realize the extent of the problem.
In early May, Elon Musk announced that he had paused the acquisition, announcing that the negotiations would not go on until the social network would provide his team with the tools to independently verify the real number of bots on Twitter.
But the question of bots may not be enough
You don’t need a crystal ball to guess Elon Musk’s true intentions. The billionaire presented his buy offer at the worst possible time, just weeks after one of the most impressive crashes in the US stock market.
Elon Musk has every reason in the world to want to see the deal scrapped. Conversely, Twitter has a diametrically mirrored interest – as shareholders would have the option of exiting the company for compensation that is significantly higher than Twitter’s current market value.
In the letter sent to the SEC, Elon Musk’s lawyers argue that Twitter – having not provided enough information to verify the number of bot and fake accounts on the social network – has violated the agreement. Not only that, the refusal to provide this information would be what US law calls a ‘ material breach ‘. That is, a breach of contract so serious as to allow the counterpart – that is Elon Musk – to withdraw from the negotiations without any consequence. Without having to pay the $ 1 billion penalty stipulated in the agreements.
Now the Twitter board has the power to challenge the withdrawal of Elon Musk’s offer. Or, rather, it has a duty to do so. He has to do so because of his fiduciary obligations to the company’s shareholders, who are hugely penalized by the constant twirls of Tesla’s CEO.
Twitter has already announced plans to sue Elon Musk. The issue is delicate and risks leading to a long and complex legal dispute.
Asked by the New York Times , Ann Lipton, a corporate law professor at Tulane Law School, explained that Musk’s claim to use the inconsistency of the data on the number of bots present on Twitter will not be enough to withdraw the offer without consequences. . In short, it would not be true – as claimed by his lawyers – that the refusal or failure to provide correct data on the spam problem constitutes such a serious breach as to relieve Musk of any contractual obligation.
“The misrepresentation of this information is not enough to abandon negotiations out of the blue,” he explained. “It would only be so if the omission were of such serious proportions as to completely compromise the economic value of the agreements.” In short, a gap between the declared and the real figure of a few percentage points would not be enough. Musk should prove that Twitter is such a big lie that it practically constitutes a fraud against investors and advertisers of the social network.
But has Elon Musk really given up on any ambition to buy Twitter?
The fact that Elon Musk does not want to proceed with the purchase at the price proposed three months ago does not mean that he is not willing to buy the social network at a different price. And the doubt remains: is this yet another unscrupulous bluff?
The precedents are not lacking. “During the early stages of the pandemic, the LVMH Moët Hennessy Louis Vuitton group threatened to withdraw its proposal to buy Tiffany & Company,” recalls the NY Times. “It turned out that the two sides agreed for a different amount, and that LVMH took Tiffany home with a $ 420 million discount.”
Perhaps neither Elon Musk nor Twitter really want to bring the matter to the courts. After all, who is it convenient for? The colossal legal duel between Epic and Apple , for example, had brought more than a few dirty cloths from both companies out into the open. Such a lawsuit would surely involve the disclosure of a large number of Twitter’s confidential information. Elon Musk’s lawyers would have the ability to obtain the emails and private communications of social media executives, and Twitter would risk slipping further into the stock market, towards even lower values.
So it is also not excluded that Elon Musk uses this abrupt U-turn to renegotiate the agreement and ask to recalculate his offer downwards. Given the singular unfavorable conditions of the global economy, it cannot be ruled out that Twitter may decide to indulge yet another whim of the richest man in the world.