Elon Musk’s dispute with Twitter is unconventional and complex. Here’s a guide to how it has unfolded.
For five months the richest man in the world has been engaged in a Homeric battle with one of the world’s most influential social networks.
Elon Musk against Twitter is the soap opera of the year in business circles and beyond, as the microblogging platform is the key crossroads at which the world’s opinion makers and trendsetters meet.
Here’s a summary of this battle. A five-day trial in Delaware Chancery Court is due to start on Oct. 17 unless the two sides reach an agreement before then.
How It All Began
On April 4 Musk, the chief executive of electric-vehicle leader Tesla (TSLA) – Get Tesla Inc. Report, took everyone by surprise by disclosing that he owned 9.2% of Twitter. This stake made him the platform’s top shareholder.
The billionaire chose a Securities and Exchange Commission Form 13G to disclose his investment. That form, according to SEC rules, indicated that Musk would be a passive investor.
And that, in turn, meant that Musk was committed not to influence those who controlled the company — and that the tech tycoon wouldn’t do anything to take over Twitter.
But on April 5, he sent new documents to the SEC in which he and Twitter indicated that he would be an investor and holder who would indeed weigh in on Twitter’s strategy.
In a word, he was to be an activist, an intention telegraphed by the new form he filed, a 13D.
Twitter’s Reaction
The two parties reached an agreement, according to which Musk could not acquire more than 14.9% of Twitter until 2024. In exchange, he obtained a seat on the board.
“Looking forward to working with Parag & Twitter board to make significant improvements to Twitter in coming months!” Musk reacted.
But on April 10, Twitter announced that the agreement was null and void because Musk had decided not to join the board.
The First Major Twist
On April 14, boom: The Tesla CEO made a takeover bid for Twitter at $54.20 a share, valuing the company at $44 billion. That was a 38% premium to Twitter’s stock price for that month.
“Will endeavor to keep as many shareholders in privatized Twitter as allowed by law,” the tech mogul asserted.
Twitter was shocked by the move. During an emergency all-hands meeting on April 14, Chief Executive Parag Agrawal told employees that Twitter would not be “held hostage” by Musk.
A day later, Twitter adopted a strategy known as a poison pill. Simply put, if someone acquired more than a certain amount — here, 15% — of the stock against management’s wishes, holders could buy shares at a discount to the point that the deal would become prohibitively expensive.
On April 15 Twitter’s board unanimously voted to adopt the poison pill, a plan lasting until April 14, 2023.
Second Major Twist
On April 25, Twitter accepted Musk’s offer. The billionaire celebrated the acceptance with thundering statements.
“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,” Musk said in a statement.
“I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans.”
“Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it,” he added.
The Funding
Once Musk and Twitter agreed on the terms, all eyes turned to funding.
The question arose: How was the richest man in the world going to finance this transaction? While his wealth was measured at more than $200 billion on paper, it was not liquid since so much of it was tied up as Tesla stock.
On May 26, Musk reassured everyone by announcing that he had closed out his margin loans linked to Tesla shares and pledged another $6.25 billion in equity to fund the takeover.
The Drama
On May 13 came big drama: Musk said that the deal was “temporarily on hold.”
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk said.
He added that he was still “committed” to the deal.
The statements were made in response to a Reuters story from May 2. The story, based on a Twitter SEC Form 10-Q filing, stated that Twitter had 229 million users who viewed consistent ads, adding that less than 5% of its monetizable daily active users were fake accounts.
Four days later, Musk threatened: Prove Spam Account Data or the $44 Billion Takeover Deal Is Off, as TheStreet’s Martin Baccardax wrote.
“My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of
A public tussle ensued, with both parties railing against each other.
July 8: Thunderbolt
On July 8 Musk withdrew his offer. In an SEC filing Musk said he’d wanted to end the deal because of disagreements about the number of spam bots, or fake accounts, on the platform.
On July 12, Twitter decided to sue the billionaire to enforce the original merger agreement.
“Twitter has filed a lawsuit in the Delaware Court of Chancery to hold Elon Musk accountable to his contractual obligations,” Chairman Bret Taylor said on Twitter.
The Legal Battle
Since Twitter’s complaint, the two camps have engaged in a guerrilla war of subpoenas.
Musk lost a round when Chancellor Kathaleen McCormick decided that the trial would start Oct. 17, a week before the Oct. 24 deadline that both sides had set to finalize the transaction. The billionaire wanted the trial to take place in 2023.
But on Sept. 7 the Tesla CEO was allowed to amend his claims with whistleblower allegations in support of his argument.
Which side will win? Will the two sides settle? Stay tuned.
