Unlike most corporate lawsuits, the Twitter summary of Elon Musk breaching his agreement to buy the social media giant makes for interesting reading. It’s more pulp novel than mind-numbing legal jargon, which helped convince many journalists that Twitter has an airtight case in a somewhat complicated legal doctrine called “specific performance.”
Musk is the richest man in the world, also someone who thinks he can get away with it. Crazy Elon enjoys challenging securities regulators on deals and brazenly attacking anyone who gets in his way (often on Twitter) without recourse.
Finally, he would be responsible! He will have to follow through on his initial $44 billion purchase.
But after looking past the adjectives and digesting the sometimes unsavory details of Musk’s Twitter dance, I’m not so sure how this will end, other than providing a huge payday for all the lawyers involved.
First of all, there are no really good guys here.
Twitter is hugely popular, but controversy has surrounded the company since it went public in 2013. Its “awakened” programmers enjoy suffocating speech. For all its relevance, Twitter has long been critical of shareholders. Often still loses money. Management has refused to make significant changes to its business model.
Enter Musk, America’s best-known corporate disruptor for making his electric vehicle company Tesla profitable and a cultural icon.
As even Twitter’s own lawsuit points out, Elon came to the company with an offer he couldn’t refuse: a roadmap to make Twitter fair and financially successful (cut costs, get rid of bots, and make the platform more efficient). ad-friendly). Plus, he had a ton of cash that no one else would put up.
‘Best and last offer’
Twitter’s lawsuit is at its strongest when it shows just how erratic Musk can be. He is no ordinary CEO surrounded by lawyers and advisers monitoring his every move. The lawsuit points to how he began secretly and perhaps illegally amassing a significant stake in the company without giving proper disclosures to the Securities and Exchange Commission.
When he initially spoke to the board about his investment, he acted as a friend looking to help current management as a board member. But that quickly changed. Unexpectedly, he hit them with demands to accept his “best and last offer” of $44 billion, waved due diligence and threatened to go to war unless Twitter relented, the suit shows.
Now, before you get teary-eyed over Twitter, consider that management had no choice but to play along with Musk.
Bots may represent no more than 5% of all users, but they are a huge and annoying problem. Their algorithmic cancellation culture stifles user thinking and growth.
Musk, of course, became so rich through his stake in Tesla that it continued to rise in price for years until Jerome Powell recently stopped the speculative bubble it created. When Tesla stock began to reflect reality, for all its popularity and rising profitability, its stock is still grossly overvalued by traditional metrics, the stock tanked along with Musk’s net worth by roughly $50 billion. (It’s worth just $230 billion at press time.) .
Then Musk realized that not only was Twitter a basket case, but his own money was rapidly evaporating. Suddenly, talk of the deal turned sour, the lawsuit shown in all its gory detail, with Crazy Elon tweeting Twitter poop emojis about the company and accusations that he was hiding things like the real number of fake accounts.
‘Model of hypocrisy’
At first glance, such a claim seems far-fetched and would amount to the corporate crime of the century, as Twitter has publicly stated for years that bots make up a small percentage of all users.
No matter. A nasty letter to Twitter a week ago from Musk’s lawyers said he wanted out of the deal because Twitter was negotiating in bad faith over the fake accounts. Twitter’s lawyers characterized Musk’s charges as a “model of hypocrisy” as getting rid of the fake stuff was how he said he was going to make Twitter profitable.
Now this sordid show is headed to the Delaware Chancery Court, the place to go to settle high-profile corporate lawsuits.
On Friday night, Musk responded to Twitter, saying he was on firm ground to terminate the deal because the company’s bot revelations could be false, thereby violating the merger agreement. He said the court should reject Twitter’s attempt to speed up the trial because it takes time to prove it.
“Given the players involved, you reporters are going to have a lot of fun,” a lawyer in the case told me. Think about Johnny vs. Amber in business disputes, also with many references to poop.
Lawsuits are always hard to predict, but the Court of Chancery tends not to be kind to erratic mavericks like Musk. Twitter’s share price has fallen amid the tug-of-war, from which shareholders appear to have suffered.
Or maybe not. All Musk really did during his nasty tweet was expose flaws in the company’s business; he might be exaggerating the number of fake accounts, but even Twitter would recognize that they’re a problem. If anything, he provided a roadmap on how to save Twitter: get rid of fake accounts, stop stifling free speech that annoys half the country, and rein in spending.
Crazy Elon could win again.