The billionaire has turned his $44 billion takeover bid for the microblogging website into a twisted saga.
Traditionally, negotiations around mergers and acquisitions take place behind the scenes.
Bankers and lawyers from both sides — the acquirer and the target — talk away from the media spotlight.
The media generally discover the existence of a potential transaction via leaks, an official filing or a previously vetted press release from one or both parties.
The progress of the negotiations is often known through indiscretions in the press.
Often when negotiations are at a standstill one of the parties organizes leaks in the media to unblock the situation by forcing the hand of the other.
But rarely, discussions are held publicly
The general public or employees of the target company often find out about everything through the press. One of the reasons for explaining this silence and secrecy is to avoid manipulating the markets.
All of these traditional rules have just been shattered with the ongoing $44 billion acquisition of Twitter by Tesla (TSLA) – Get Tesla Inc. Report CEO Elon Musk.
The Future of Twitter Is Decided on Twitter
To be clear, Musk has advisers, including the investment bank Morgan Stanley and the lawyers of the law firm Skadden, Arps, Slate, Meagher & Flom led by Mike Ringler.
But this time, he’s the one leading the dance.
The tech tycoon, who considers the microblogging website to be the de facto town square of our times, has a not very subtle message to deliver.
That is: “I have nothing to hide.”
It is thus in tune with the spirit of the times, which wants everything to be shared on social media, transparently and in real-time.
Users are thus invited to play the role of judge by taking sides.
But it would be more accurate to say that the general public is called upon to designate the executioner and the victim, to divide the wrongs from the rights, and ultimately to distribute the blame when things go badly.
On April 4, Musk announced that he had become a shareholder of Twitter with a 9.2% stake.
On April 14, the world’s richest man made a $44 billion bid at $54.20 per Twitter share to acquire the entire firm.
He explained that his transaction aims of restoring the principles of free speech and his desire to solve the problem of spam bots or fake accounts that abound on the platform.
Faced with the reluctance of the management of the board of directors, Musk embarked on a public campaign to pressure Twitter — essentially using social media to win public opinion for his bid.
“I made an offer,” the billionaire tweeted on April 14, with a link to a financial statement with all the details.
Why Does This Matter?
Each user can thus consult the offer in question and form his own opinion whether it is fair or not.
As usual, Musk then held a poll to launch a public campaign against the board.
“Taking Twitter private at $54.20 should be up to shareholders, not the board,” he asked.
In addition to this poll, Musk also began to publicly denigrate the board and management of Twitter.
Remarkably, the company eventually gave in.
But faced with questions about the financing of the deal and falling markets, the mogul relaunched his lobbying campaign for a price significantly lower than the proposed $54.20 per share.
Indeed, since the billionaire’s offer, Twitter’s share price — which had closed at $45.85 on April 13, the day before the announcement of the hostile takeover — has fallen by 16% and is currently trading around $39.56.
Public Threats
Instead of seeking to privately negotiate a reduction in the initial price, Musk opted for a public showdown and a public renegotiation marked by threats to walk away.
And instead of talking about the environment that has changed, he unearths an old and known problem of Twitter and has linked the future of his offer to a fully transparent accounting of the platform’s spam bots or fake accounts.
Basically, the mogul is accusing Twitter of financial misrepresentation linked to these false or spam accounts — despite the company including its estimation of how many of those accounts is has in its financial disclosures every year since 2013.
“We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the first quarter of 2022 represented fewer than 5% of our mDAU during the quarter,” Twitter wrote in its 10-Q filed with the Securities and Exchange Commission on May 2.
MDAU refers to monetizable daily active usage or users, an important parameter for advertisers.
On June 6, Musk threatened to terminate the merger if Twitter doesn’t provide him the information he said he has been seeking about the number of bots.
“Based on Twitter’s behavior to date, and the company’s latest correspondence in particular, Mr. Musk believes the company is actively resisting and thwarting his information rights (and the company’s corresponding obligations) under the merger agreement,” Musk wrote in a letter filed with the SEC.
“This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement,” it said.
You can read the entirety of that SEC filing here.
A New Tradition
So how successful will Musk ultimately be with these tactics?
The problem is that Twitter and spam bots are an old story and Elon Musk knows the chorus well.
In April, he twice said that one of his priorities in buying Twitter was to get rid of these fake accounts.
“If our twitter bid succeeds, we will defeat the spam bots or die trying!,” Musk wrote on April 21.
Musk also spoke about the bot situation earlier this month during a TED interview with Chris Anderson.
“I mean, frankly a top priority I would have is eliminating the spam and scam bots and the bot armies that are on Twitter,” he said.
“I think these influence … They make the product much worse. If I had a dogecoin for every crypto scam I saw, I would have a hundred billion dogecoin.”
The board of Twitter has not moved for the moment. It continues to claim that the transaction will be priced at $54.20 — and has already warned shareholders to brace for significant litigation costs if the deal falls through.
No matter the outcome of this standoff, Musk has shown once again that he does things his way.
Traditions are not for him. This is neither the first time nor the last time that the billionaire will distinguish himself from his peers.
It’s the new tradition. And as long as Musk institutes it, it will last.
