It was late January and Elon Musk had just announced a gear change to Tesla, the world’s largest electric car company. Amid a global supply chain crisis, the company would not launch any new models until at least 2023. But the $ 230 billion (194 billion pounds) U.S. tech mogul had found another focus for your attention. Within days, he had begun investing large sums in Twitter shares, to build a stake that eventually reached more than 9%.
On March 26, Musk held a conversation with his old friend Jack Dorsey. But it wasn’t an informal update: Dorsey, who co-founded Twitter, had retained a seat on its board and the two men, along with another board member, discussed whether Musk should also become director.
The other topic of conversation was the future of social media.
It’s a future that now, at least for Twitter, hangs in the balance. The platform last week launched a multimillion-dollar lawsuit against Musk after the businessman abandoned a $ 44 billion deal to buy the company. In a presentation describing his claim, the Twitter legal team has given a one-on-one account of the events that led to the collapse of the agreement.
The Twitter logo on a screen on the New York Stock Exchange this month. Photography: Brendan McDermid / Reuters
Twitter is asking a Delaware court to force Musk to complete the acquisition it agreed to in April at $ 54.20 per share. In legal jargon, it is looking for “specific performance” – a requirement that completes the deal as agreed – and a consensus is being formed that Twitter has a strong case. He calls for a speedy hearing in September, hoping a verdict will arrive before the deadline to complete the deal on Oct. 24. On Friday, Musk filed a motion against Twitter’s request to expedite a trial and instead seeks a date in February next year.
Twitter lawyers have not stung the words. His scathing account of events offers an inside insight into how an unlikely corporate collaboration between a billionaire tweeting his hip and the platform to which he probably spends too much time fell into bloody bitterness. The first paragraph of his lawsuit reads: “After putting on a public show to put Twitter into play, and after proposing and signing a merger agreement favorable to the seller, Musk believes that, unlike anywhere else, subject to Delaware contract law, is free to change its mind, dirty the company, disrupt its operations, destroy shareholder value and leave. “
The document details how, at least from a Twitter perspective, the relationship was complicated from the start. After Dorsey’s conversation, Musk made it known on Twitter that he wanted to join the board, buy the company, or take it private. Musk then spoke at joining the board with Twitter CEO Parag Agrawal, its chairman Bret Taylor, and a board member: Martha Lane Fox, the British co-founder of Lastminute.com.
Musk was offered a place and was accepted in early April. But a few days later, he said on Twitter that he would not join the board. Instead, I wanted to buy the company. Agrawal revealed the turn on April 11th.
On April 13, Musk exposed his offer to the board and publicly announced it a day later. In a sign that Twitter wasn’t entirely happy about it, it adopted a “poison pill” defense, designed to prevent an unwanted suitor from accumulating a significant stake.
It is at this point in the account of the facts of the lawsuit that Musk’s tweets begin to appear. This series of messages to his more than 100 million followers is unlikely to help his case. The document refers to repeated indications from Musk that a “bidding bid” (or hostile bid) for the company is imminent, including a tweet that says “Love Me Tender.”
After going back and forth, an agreement was drafted and the board recommended the offer to shareholders despite, as the lawsuit says, suspicions: “Twitter had been hit by Musk’s layoffs before.” There were more side winds to come.
Musk began to have cold feet, claims say, when markets turned against technology stocks. Its loss offer now, but high yields in the future, began to look less attractive as the world economy faltered and interest rates soared. The resulting sale lowered stock prices, affecting not only the value of Twitter, but also Tesla, whose shares were a key source of funding for the deal for Musk.
At this point, Musk began asking questions about the number of spam accounts on Twitter, which the company has always insisted represent less than 5% of a daily active user base that reaches 229 million people.
In the lawsuit, Twitter claims that tanker markets are adjusting to the sudden appearance of a reef by Musk in early May. “As the market (and Tesla’s share price) declined, Musk’s advisors began demanding detailed information about Twitter’s methods for calculating mDAU. [monetisable daily active users] and estimate the prevalence of fake or spam accounts. ”Not long after, on May 13, Musk tweeted that the deal was“ temporarily suspended ”over the issue of spam, and his willingness to complete the transaction went plummet after that.
The Twitter deal is temporarily suspended pending details that support the calculation that spam accounts actually account for less than 5% of usersttps: //t.co/Y2t0QMuuyn
– Elon Musk (@elonmusk) May 13, 2022
Twitter says it was surprised by Musk’s statement that the deal was temporarily suspended, but that he had an idea from the days before his Morgan Stanley bankers had circulated the agenda for a meeting with Twitter which included the question, “How do you estimate? that less than 5% of mDAUs are fake or spam accounts?”
After uploading the surprise tweet, there was a legal fight: the Twitter settlement lawyer called Musk’s settlement lawyer. Two hours later, Musk tweeted late that he was still “committed” to the deal. But it could not be avoided. Days later, he tweeted a poop emoji to Agrawal in response to a long Twitter thread from the CEO explaining the spam problem. The tweet inevitably appears in the lawsuit as part of Twitter’s argument that Musk himself breached the deal by repeatedly disparaging the company and its employees.
From there, it seemed inevitable that on July 8, Musk’s lawyers would write on Twitter declaring that he would terminate the deal. In the lawsuit, Twitter details “multiple” attempts to meet with Musk and clarify the spam issue. There was never a meeting.
Twitter founder Jack Dorsey said he would leave the company after the acquisition of Musk. Photography: Alamy
Howard Fischer, a partner at New York law firm Moses & Singer, says the Twitter case has many chances of success, in part because of Musk’s behavior. “While courts are generally reluctant to order specific action in these contexts, this could be one of the rare cases to justify this remedy.”
In the termination letter, Musk made three general arguments: that Twitter had breached the agreement by not providing enough information about spam accounts; that he had misrepresented the number of spam accounts in his disclosures to the U.S. financial control body; and that he had breached the agreement by not consulting it when he fired high-level employees recently.
The lawsuit refutes them one by one, arguing that Twitter “backed down” to respond to all requests for information; that there is no evidence that you have the wrong spam numbers; and that he contacted Musk’s attorneys about the dismissals, who were in normal operation anyway and received no objections.
Anat Alon-Beck, a law professor at Case Western Reserve University in Ohio, says Delaware jurisprudence indicates that Twitter has a strong hand. She says one of Musk’s key arguments, that the problem of Twitter spam represents a “material adverse effect of the company” that substantially alters the value of the company, will be difficult to corroborate. “I think Twitter has the advantage here, according to Delaware jurisprudence,” says Alon-Beck.
Twitter shares rose 9% last week to $ 37.74, reflecting investors ’belief that he has a good case. But it still leaves the prospect of a company forcing a suitor who doesn’t like to buy a company he doesn’t want.
Chronology
Elon Musk’s offer on Twitter
Show
Key dates in Tesla’s billionaire campaign to gain control of the social media giant
January 31, 2022
Construction of stakes
Elon Musk starts buying shares on Twitter
March 26, 2022
Previous conversations
Musk talks about joining the Twitter board with two directors, including co-founder Jack Dorsey
April 4, 2022
The bet was revealed
Musk reveals a more than 9% stake in Twitter
April 5, 2022
Commitment to the board
Twitter says Musk will join the company’s board
April 11, 2022
First indications of an offer
Twitter says Musk will not join its board as the head of Tesla prepares a takeover
April 14, 2022
The offer
Musk is offering $ 54.20 per share for Twitter, a 38% premium over the April 1 Twitter closing price.
April 15, 2022
‘Poison Pill’
Twitter adopts a “poison pill” defense, which prevents a suitor from accumulating a significant stake, to protect the company from an unsolicited takeover
April 21, 2022
Financing
Musk announces that it has lined up $ 46.5 billion in funding for the deal
April 25, 2022
Acceptance
The Twitter board accepts Musk’s offer
April 29, 2022
Tesla assets
Musk sells more than $ 8 billion worth of Tesla shares to fund the acquisition
May 5, 2022
Sponsors join the offer
Musk reveals he has raised $ 7.1 billion in funding for the bid from a group of investors, including tech mogul Larry Ellison.
May 11, 2022
Dorsey thinks he will resign
Dorsey says he will not return as CEO after the acquisition
May 13, 2022
Agreement pending
Start sliding to completion. Musk says the Twitter deal is on hold pending a review of spam and fake accounts. He later tweets that he is still committed to the deal.
May 25, 2022
Tension of the boardroom
Twitter investors are voting against re-electing an ally of Musk on the board
May 26, 2022
Twitter …