On Thursday, April 14th, Elon Musk introduced a proposal to purchase Twitter for $54.20 a share. On April twenty fifth, Twitter accepted the deal. By July eighth, Musk wished out. Then Twitter sued Musk. And now we’re headed for Chancery Court in Delaware for a five-day trial in October that may decide who owns Twitter — and what occurs after.
This is a large story with rather a lot of fast-moving elements to it. It’s additionally a narrative that may doubtless stretch out over the subsequent few months, possibly even longer. So we thought we’d put collectively a information for you, our readers, that may be up to date as issues proceed to unfold. Because, like Elon, we ❤️ you.
So strap in. It’s going to be a bumpy trip.
Musk’s attorneys have now despatched three letters to Twitter trying to terminate his settlement to purchase the firm. This time, they cited Twitter’s multimillion-dollar severance fee to Zatko, saying it was a violation of the merger settlement and a purpose to finish the deal.
A couple of days later, Twitter responded the approach it at all times does: your argument is invalid, Twitter hasn’t breached its facet of the deal, and so you possibly can’t both.
In early September, Delaware Chancellor Kathaleen McCormick stated that Musk’s facet can embrace Zatko’s claims in its case however denied yet another effort to delay the trial. “I am convinced that even four weeks’ delay would risk further harm to Twitter too great to justify,” McCormick stated. And as we proceed to study extra about the brain drain happening at Twitter, it appears she is perhaps proper.
Musk and his staff tried to make use of Zatko’s revelations about Twitter this as an opportunity to possibly, really get out of the deal. His attorneys filed a new “Termination Letter” with the SEC on August twenty ninth, which cites Zatko’s testimony as proof that Twitter misled Musk in the events’ merger settlement. Specifically, Musk claims that Twitter’s declaration in the merger settlement that it had not misled the SEC is fake. Twitter responded saying principally, nope, we haven’t breached any of our settlement.
The relaxation of the story to date:
Peter “Mudge” Zatko was fired in early 2022 from his place as Twitter’s head of safety. In July, he filed a whistleblower report saying Twitter has hidden negligent safety practices, misled federal regulators about its security, and didn’t correctly estimate the quantity of bots on its platform. Zatko is a long-tenured and well-respected voice in the hacker and safety group, and his allegations are certain to have a huge effect out and in of Twitter. Congress, for one, has already stated it is investigating Zatko’s claims.
Zatko’s disclosure says instantly that Twitter lied to Musk about its spam and bot measurements, which might be fodder for Musk’s complaints about spambots, although Zatko’s assist for these specific allegations feels pretty skinny. Twitter denied all the accusations, calling them “a false narrative.”
The subpoenas forward of the trial have turn out to be a who’s who of the tech business, together with Dorsey, Larry Ellison, Marc Andreessen, Tesla, Keith Rabois, and lots of others. Dorsey was a shock however appears prone to have lots of pertinent info, given each his tenure as Twitter CEO and the undeniable fact that Dorsey reportedly pushed arduous to persuade Musk to purchase the firm in the first place.
The financing construction of Musk’s Twitter acquisition has shifted over time, however even after promising in April that “no further TSLA sales planned after today,” Musk offered one other large batch of his shares. “In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through,” he tweeted quickly after, “it is important to avoid an emergency sale of Tesla stock.”
Musk’s facet wanted more time and for the trial to begin in February 2023. Twitter wished it to begin as quickly as doable. Chancellor McCormick, who will oversee the trial, stated the trial will begin on October seventeenth and can final 5 days. Of course, that assumes the two sides don’t settle, and that is still anybody’s guess.
Twitter seems to be already feeling the Musk Effect: when it reported earnings in July, the firm stated its income fell for a spread of macroeconomic causes but in addition as a result of of what it described as “uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk.” One factor Twitter gained’t give Musk credit score for? Its consumer progress. The service reported reaching greater than 237 million day by day customers, up from 229 million final quarter. That, of course, was as a result of “ongoing product improvements.”
We wouldn’t usually inform you it’s price studying a 162-page authorized submitting that will get deep into the weeds of bot measurement procedures. But this case has been stuffed with abnormally spicy legal fighting, a lot of which was clearly written to be learn by a large viewers. It’s yarn.
Almost as quickly as Musk made clear his intentions to get out of shopping for Twitter, Twitter filed a lawsuit that stated, in impact: you agreed to pay $44 billion for Twitter, and we intend to get all $44 billion for our shareholders. Twitter filed its swimsuit in the Delaware Court of Chancery, which instantly grew to become the most enjoyable judicial system no one had ever heard of. It paints an image of Musk going out of his technique to make an surprising and unusually beneficiant provide to Twitter, solely to virtually instantly flip round and begin toying with the firm and the concept of abandoning their settlement.
It seemed prefer it was going to occur, after which it did: solely weeks after asserting his intention to purchase Twitter, Musk tried to get out of it. Musk’s staff claimed he was terminating the deal as a result of Twitter was in “material breach” of their settlement and had made “false and misleading” statements throughout negotiations. In specific, Musk was involved about the prevalence of faux or spam accounts on Twitter and what he noticed as Twitter’s reluctance to show its personal analysis on the topic.
Musk joined a digital city corridor with Twitter staff and tried to reply their questions about the future of the firm and platform. He provided imprecise solutions about eager to emulate WeChat and learn from TikTok and letting folks work from home more often whereas saying Twitter would entice 1 billion customers. Meanwhile, he hinted that significant layoffs might be in the firm’s future.
After a quantity of cagey tweets and “just asking questions” types of strikes, Musk’s authorized staff made its first official menace to again out of the acquisition. In a authorized submitting, they claimed that Twitter failed to supply Musk with info on the service’s spam bot drawback and that he’s entitled to obtain that info below the deal settlement. Twitter, they wrote, was actively stopping him from getting the info he wanted.
“My offer was based on Twitter’s SEC filings being accurate,” Musk tweeted, referencing Twitter’s oft-cited number that lower than 5 % of the accounts on the platform have been faux or spam. “Yesterday, Twitter’s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does.” Musk’s frustration gave the impression to be completely beside the level and the kind of factor he ought to have raised earlier than signing a binding settlement to purchase the firm. But it was clear that if Musk determined he did need out, this may be his approach.
The turmoil inside Twitter wasn’t simply coming from Musk and his authorized staff. Parag Agrawal, the still-new CEO of the firm, fired some of his high executives, together with shopper product chief Kayvon Beykpour and Bruce Falck, the common supervisor of income and head of product for its enterprise facet. “The priorities and decisions we make now will not only bolster how we navigate through this time,” Agrawal said in a memo to Twitter’s staff, “but also for the longer-term success of Twitter which I care about deeply.”
One different huge Twitter-under-Musk query is what he’ll do about the platform’s everlasting ban on Donald Trump. Musk stated throughout a Financial Times convention that he’d undo it. “I guess the answer is I would reverse the permaban,” he stated, “obviously I don’t own Twitter yet, so it’s not a thing that will definitely happen because what if I don’t own Twitter?”
Could Twitter Blue be the future of Twitter? Musk thinks so. He believes he can flip Twitter subscriptions right into a $10 billion enterprise by 2028, which might be double the total firm’s present income. Of course, that additionally consists of large consumer progress: Musk estimated Twitter might have 600 million customers in 2025 and 931 million in 2028. That’s a giant leap from the firm’s present crop of 217 million customers.
On April twenty fifth, Twitter’s board of administrators accepted Musk’s provide of $54.20 per share, or $44 billion, for complete management of the firm. It was the similar worth he named in his preliminary provide on April 14th. Upon completion of the transaction, Twitter will turn out to be a personal firm. Musk started working to line up financing for the deal and offered 9.6 million of his Tesla shares to unlock about $8.4 billion.
Hours after asserting his bid to purchase Twitter, Musk was on stage in Vancouver for a well-timed interview with TED Talk founder Chris Anderson. During the dialog, Musk spoke about his “obsession with the truth” and echoed feedback he made in his SEC submitting about wanting to guard free speech and democracy.
Musk could also be in for a impolite awakening if he is ready to purchase Twitter
But as Adi Robertson identified, his understanding of free speech seems to be nebulous at greatest. After analyzing Musk’s feedback, in addition to earlier efforts by Twitter’s management to take care of speech legal guidelines round the world, she concluded that Musk could also be in for a impolite awakening if he succeeds in shopping for the social media platform.
Twitter’s first all-hands assembly after Musk’s bid went public was a bizarre one. After serenading staff with Backstreet Boys and Aretha Franklin, the firm stated it might proceed to judge the provide.
Employees instructed The Verge’s Alex Heath they have been annoyed by the lack of a extra detailed response. They’re involved about the future of the social media platform, in addition to the chance of layoffs.
Musk is a really wealthy man. So, naturally, he would say that he isn’t fascinated by shopping for Twitter to earn money. He views Twitter as the “de facto town square” and needs to open supply the social media firm’s algorithm. He tried to border the complete takeover bid as some kind of campaign to guard free speech.
But even a free speech maximalist like Musk must persuade shareholders that his buyout provide is of their monetary self-interest. Otherwise, what are we actually doing right here?
Anyone who’s been in the market to purchase a home is aware of about “best and final” affords. In his opening salvo, Musk claimed his bid to purchase Twitter was precisely that. He was providing Twitter’s shareholders a reasonably honest premium: $43 billion for a corporation with a $37 billion market cap.
Musk stated that Twitter should go non-public as a way to endure the modifications that have to be made. These included an edit characteristic, an open-source algorithm, much less moderation, and a better bar for eradicating offending tweets.
After news broke that Musk had acquired 9.1 % of the firm’s shares, many individuals briefly entertained the notion that Musk may attempt to purchase the complete firm, solely to finally conclude he had already gotten all the things he wished out of Twitter.
Casey was proper in positing that Twitter’s poison capsule provisions is probably not sufficient to cease Musk. But he additionally assumed that Musk would simply proceed to troll the firm by his tweets.
After declining a seat on Twitter’s board, Musk up to date his submitting with the Securities and Exchange Commission to point that he wouldn’t be a passive participant in the firm’s affairs. Gone was the language that he would prohibit his holdings to simply 14.0 % of the firm. In retrospect, this was the first clue that he might try one thing extra impactful than simply shopping for some inventory of serving as a board member.
A thousand years in the past, on April 4th, 2022, Elon Musk introduced that he had purchased 9.1 percent of Twitter. The news that the world’s richest man was now (briefly) the largest shareholder in his most well-liked social media platform despatched the inventory worth hovering and lots of a keyboard a-typing.
Musk instantly set about soliciting strategies about methods to enhance Twitter by — what else — tweeting a poll. The firm responded by offering him a board seat, a transfer that may have restricted him to owning just 15 percent of the company. At first, he stated sure. Then he modified his thoughts and said no. Meanwhile, our resident Twitter and Musk consultants, Casey Newton and Liz Lopatto, respectively, dug deeper into why Musk was flirting with Twitter and what the doubtless outcomes can be.