Elon Musk says Twitter deal “can’t move forward” in the current situation

Elon MuskChaos Agent.

Mr. Musk, the richest man in the world, continued to stir up confusion Acquisition of Twitter for $44 billion On Tuesday, even as the social media company tried to keep the deal on track. Early in the morning, the billionaire tweeted that “this deal cannot move forward” until he got more details about the amount of spam and fake accounts on the platform.

A few hours later, Twitter said it was “committed to completing the transaction at the agreed price and terms as quickly as practicable.” It urged its shareholders to support the bid by Mr. Musk, who appeared to conduct public negotiations via Twitter even though he struck the massive deal to buy Twitter last month.

Mr. Musk’s skeptical – and erratic – comments about the takeover have made investors, bankers and Twitter himself guess his motives. Some analysts believe the 50-year-old is trying to lower the purchase price or walk away from the deal altogether. Many were alarmed by his methods, with market-influenced pronouncements thrown out at conferences or in emoji-filled tweets in the middle of the night.

However his comments are in line with The ways Mr. Musk has worked for a long time, where he is often a winger in the bigger moments, shuns the experts and relies almost solely on his own advice. Years ago, he said he stopped making business plans. And people close to Mr. Musk He said That he had absolutely no plan when he made an offer to buy Twitter last month.

“I think all of this is just about making a lot of noise and showing what kind of headache it would be to the company if they tried to sue this,” said Ann Lipton, professor of corporate governance at Tulane School of Law. .

Twitter shares fell 8 percent on Monday and rose more than 3 percent on Tuesday. They were hovering at $38 a share, well below the $54.20 a share that Musk agreed to pay the company and less as it traded before the billionaire initially revealed in March that he had bought a large stake in Twitter.

Behind the scenes, the two sides are going ahead with the deal: They jointly drafted a regulatory dossier on Tuesday. renegotiate the deal It won’t be easy for Mr. Musk. In addition to the $1 billion breakup fee, the deal with Twitter includes a “limited performance clause,” which gives the company the right to sue and force it to complete the deal as long as the debt financing it agreed to remains sound.

Musk, who also leads rocket company SpaceX and electric car maker Tesla, did not immediately respond to a request for comment. “The Board of Directors and Mr. Musk have approved a transaction of $54.20 per share. We believe this agreement is in the best interests of all shareholders. We intend to close the transaction and enforce the merger agreement,” Twitter’s board of directors said in a statement.

Mr. Musk’s recent comments about the Twitter Deal Center on the topic of fake accounts on the platform. Twitter has long said in regulatory filings that less than 5 percent of its accounts are fake — a number that Musk said is hard to believe. at tweet Published at 3:32 a.m. ET on Tuesday, Mr. Musk said the number could be well above 20 percent, without providing information to support his claim.

“Based my presentation on the accuracy of the SEC filings on Twitter,” Musk said in the letter.

Part of the reason the fake accounts issue has come to the fore now is that Mr. Musk did not conduct his Twitter due diligence before agreeing to buy the company. Potential buyers usually go to great lengths to study a target’s business, customers, growth potential, and stock price before making an offer. But according to the regulations deposit From the company on Tuesday, Mr. Musk told Twitter that completing the due diligence on the social media company was not necessary before the agreement was signed.

In the depositTwitter also warned that “if the merger is not completed, and depending on the circumstances that led to the merger not being completed, our common stock price may fall significantly.” Transaction uncertainty can damage company morale and increase employee turnover.

A Twitter representative said the two vice presidents and a division chief had told colleagues on Tuesday that they would be leaving the company in search of new opportunities. The departures were previously reported by Bloomberg.

“If a bot number is very important to its assessment of a company’s value, it should do its due diligence about it before signing the deal,” said Eric Gordon, a professor of business administration at the University of Michigan. “And he should have added an explicit representation about bots to the contract.”

Mr. Musk ramped up pressure on Twitter with his public comments questioning the deal. Last Friday, he started tweeting that his purchase was Temporarily suspended“So that he can get more details about the amount of spam and fake accounts on the platform. He later continued, saying that he is still”committedfor the deal.

During the weekend, he chirp That Twitter’s legal department “called for a complaint” that it violated a nondisclosure agreement by discussing its bot sample size of 100. Mr. Musk’s deal with Twitter also contains a non-derogation clause that prevents him from tweeting negatively about the transaction.

Then at a tech conference in Miami on Monday, Musk said striking a deal for Twitter at a lower price was “Not out of questionConsider questions about spam and fake accounts.

“The more questions I asked, the more fear I had,” Mr. Musk said at the event. “So you know, at the end of the day, it has to be salvageable in a reasonable time frame and without revenue collapsing along the way.”

He added that it was a “reverse material error” if Twitter said it had less than 5 percent of fake accounts or spam, but the number is actually much higher.

“significant negative change” Buyers use items to exit or renegotiate deals if there is significant harm to the business. But such accusations rarely prevail in court. The lawyers said that the number of bots on Twitter is unlikely to qualify as a material negative statement, given that Twitter publicly discloses similar numbers every three months and there will be no apparent change in the assessment. Twitter also warns in its regulatory filings that the bot’s estimates may be “higher” than you estimate.

The Twitter deal contract contains eight pages of “acknowledgments”: effective promises about the state of the company at the time of the merger, though none of them directly relate to its number of bots.

employment MondayTwitter CEO Parag Agrawal also posted a long series detailing how the company calculates its bot count. He said the company’s internal estimates for the past four quarters “have all been well below 5 percent.”

Mr. Musk later responded to Mr. Agrawal’s thread of tweets with a poop emoji. he is too chirp at the Securities and Exchange Commission, indicating that he wanted the agency to consider the deal. (Mr. Musk was previously a topic Saudi Electricity Company inquiries.)

In its Tuesday profile, Twitter also noted the big challenges it faces Deciding whether to accept Mr. Musk’s offer. Brett Taylor, Twitter’s chairman, spoke with several institutional shareholders who recommended that the board consider Mr. Musk’s proposal against the risks of going public as a company.

Twitter also said that while its management and bankers received interest from other “financial sponsors and institutional investors,” none of the parties involved offered a specific counterproposal.

Eli Klein, co-chair of the global shareholder activism group at law firm Schulte Roth and Zabel, said Musk’s deceptions put Twitter’s board of directors in trouble.

“It then becomes a matter of, if you are the company, even though you have a really great reality pattern, how much time do you want to spend fighting,” Mr. Klein said. “Life is too short to fight with Elon Musk.”

Mike Isaac Contribute to the preparation of reports.