Elon Musk and the Twitter deal: all you need to know
25 August, 2022
The Elon Musk “will he, won't he buy” Twitter saga has been rumbling on for a number of months now, and isn't anywhere near a conclusion just yet.
The controversial deal is now heading to the courtroom, with Mr Musk attempting to pull out of the $44 billion acquisition.
Here's all you need to know about the situation:
The deal — and why did Mr Musk do it?
Having built up his stake in the company and then rejecting a seat on the board, an agreement was reached between Mr Musk, the world's richest person and chief executive of electric car maker Tesla, and Twitter's board in April for the social media platform to be sold in its entirety for $44bn.
The plan was for the company to be taken private with stockholders receiving $54.20 per share, a 38 per cent premium over the social platform's closing stock price on April 1.
Read More : Twitter whistleblower raises security concerns
A regulatory filing showed that Mr Musk was personally committing $33.5bn for the deal, which included $21bn of equity and $12.5bn from margin loans. Mr Musk, a proponent of free speech, released a statement in which he explained his purchase.“Free speech is the bedrock of a functioning democracy and Twitter is the digital town square where matters vital to the future of humanity are debated,” he said.
Mr Musk said he wanted to introduce new features and make algorithms open source to increase trust, “defeat the spam bots, and authenticating all humans”.
The reference to defeating the spam bots was a sign of things to come.
What was the reaction to the deal?
It created quite a stir across the financial world, social media and among Twitter employees who were left wondering how their jobs and workplace would be affected.
“Elon [Musk] knows one thing, and that is having things his way … [but] he hasn't given out how he wants to improve free speech,” Naeem Aslam, chief market analyst at AvaTrade, said in a note.
“If the platform is left ungoverned, it could promote racism, hurting its massive user base. There is little to no information on how Elon wants to improve Twitter's platform, although he has provided clues about what he doesn't like in the platform.”
Former US president Donald Trump, meanwhile, said that he had no intention of rejoining Twitter if his account was reinstated.
And Saudi billionaire Prince Alwaleed bin Talal, who owns a stake in Twitter through his Kingdom Holding Company, said that Elon Musk will be “an excellent leader” for Twitter after he agreed to retain his $1.9bn stake.
Next steps
The Wall Street Journal reported in early May that Mr Musk may take Twitter public again after he finalises the deal. He could list it as soon as three years after buying the company, the newspaper reported, citing people familiar with the matter.
Mr Musk gave a brief insight into his plans when he appeared at the Met Gala and said: “My goal, assuming everything gets done, is to make Twitter as inclusive as possible and to have as broad a swathe of people on Twitter as possible.”
Cracks start to appear
The deal took a turn for the worse on May 13 when Mr Musk said it was on hold pending details on the number of fake accounts on Twitter. He tweeted that he wanted evidence that fewer than 5 per cent of users were spam/fake accounts, but added that he was “still committed to the acquisition”.
Under the agreement, if Mr Musk abandons the deal, he will have to pay a $1bn break-up fee.
The bots
The bots have remained the thorny issue in the deal.
Twitter chief executive Parag Agrawal hit back at Mr Musk's concerns, saying that spam accounts accounted for less 5 per cent of users and that Twitter locks millions of accounts each week that it suspects could be fake.
However, a study by Israeli cyber security company Cheq showed that bots amount to up to 12 per cent of visits on the social media platform.
“The data suggests that Twitter's bot problem is probably larger than 5 per cent,” said Guy Tytunovich, founder and chief executive of Cheq.
Research company Bot Sentinel estimated that 10 per cent to 15 per cent of accounts on Twitter are inauthentic, according to a Bloomberg report, while Cyabra, a research company with a different methodology, puts the percentage of inauthentic Twitter profiles at 13.7 per cent.
The bot argument has see-sawed ever since, with Mr Musk alleging that he was misled but saying in August that if Twitter “simply provides their method of sampling 100 accounts and how they’re confirmed to be real, the deal should proceed on original terms”.
'Swimming naked': a major breakdown
Proof that the deal had truly soured came on July 13, when it was confirmed that Twitter was suing Mr Musk for reneging on the deal. Lawyers for Twitter told a Delaware judge that Mr Musk had failed to honour his agreement to pay $54.20 a share.
The language became more colourful as Twitter said in a US Securities and Exchange Commission filing that Mr Musk's claims he was being “hoodwinked” were “just a story, imagined in an effort to escape a merger agreement that Mr Musk no longer found attractive once the stock market, and along with it, his massive personal wealth, declined in value”.
Mr Musk's counterclaims filed in a Delaware court said: “As a long bull market was coming to a close, and the tide was going out, Twitter knew that providing the Musk Parties the information they were requesting would reveal that Twitter had been swimming naked.”
He accused the microblogging site of having played a “months-long game of hide and seek”.
The court case
Preparations are under way for both sides before the courtroom showdown, which is set to take place from October 17 in Wilmington.
Lawyers for both Twitter and Mr Musk have issued a flurry of subpoenas to banks, investors and lawyers involved in the deal.
But Bloomberg reported that Twitter was spared from producing documents for most of the employees Mr Musk says are key witnesses on the bots issue.
The exception is Kayvon Beykpour, former head of consumer product, who was fired in May. It was his product team that was most directly responsible for expanding Twitter’s user base.
Jack Dorsey, Twitter's co-founder and billionaire, has also been subpoenaed by Mr Musk.
A copy of the subpoena showed that Mr Dorsey, who left Twitter's board in May, was asked to provide documents and communication about Mr Musk's agreement to buy the company in April, plus all-important information on spam accounts.
Mr Musk's side also received a potential boost on August 23 when an 84-page whistleblower complaint by Twitter's former security chief Peiter Zatko came to light.
“We have already issued a subpoena for Mr Zatko and we found his exit and that of other key employees curious in light of what we have been finding,” Alex Spiro, a lawyer for Mr Musk, said in a statement published by news agencies.
Mr Zatko claims Twitter executives failed to disclose the true extent of spam accounts on the platform. His complaint was reported earlier by The Washington Post and CNN.
“For Musk, it’s almost like a kid waking up on Christmas morning and seeing this under the tree,” the Associated Press cited Dan Ives, analyst at investment company Wedbush Securities, as saying in an interview. “It gives the Musk camp a leg to stand on going into the court battle.”
Has Mr Musk spoken to Twitter staff?
Yes, he did so in June and conversation moved into the realm of alien civilisations during the 45-minute call.
There was also some serious chat, as he discussed freedom of speech, possible job cuts, remote working and troll farms.
Source: www.thenationalnews.com