Musk unilaterally stopped the $44 billion acquisition, Twitter: See you in court

Perhaps there is no more high-profile acquisition than Musk's takeover of Twitter.

It took only half a month from the proposal of the acquisition to the finalization of the price, but the follow-up sawing was smelly and long.

On April 25, Twitter agreed to Musk's $44 billion acquisition of Twitter.

In May, Musk announced a hold on the acquisition; in June, Musk "threatened" that the acquisition might be terminated.

On July 8, a document was submitted, and Musk tried to unilaterally stop the acquisition.

This time, Twitter "rocks without transfer" and asked Musk to meet in court.

5%, the center of the Musk-Twitter conflict

Why is this acquisition more twists and turns than twists and turns?

Ina filing with the Securities and Exchange Commission on Friday, Musk's lawyers said that Twitter had both withheld information and misled Musk about numbers, and Musk wanted to terminate the agreement.

Here's the information and numbers that the two have been arguing about for months:

Number of Twitter bots, fake accounts, spam.

Twitter says fake accounts account for less than 5 percent of its daily users, but Musk doesn’t believe it, thinking Twitter feels too good about itself and has repeatedly threatened to pull out of the deal if Twitter can’t justify itself.

Studies by some third-party researchers suggest that the reality may be double or triple the 5%.

Some analysts and Twitter staff also see this as an excuse for Musk to seek leverage in negotiations or to try to cancel the deal entirely.

It is really important to find out fake accounts. If the judgment is not accurate, it will affect the revenue such as advertising revenue . But Tulane University law professor Ann Lipton points out that it should be proven at the legal level:

Twitter's false reporting could be a reason to walk away from the acquisition, but it would have to be legal, and Musk would need to demonstrate the long-term and significant impact on Twitter's profitability. So far he has not provided any facts proving that there is such an effect.

▲ Picture from: Dado Ruvic/Reuters

In fact, going back to the acquisition agreement itself, there was no explicit mention of "fake accounts" and "spam" in it. Musk's lawyers put it another way, saying that these were "necessary information for Musk to complete the debt financing agreement."

Yes, it's also a question of where the money for Musk's acquisition of Twitter will come from, with a large chunk of that money coming from debt financing .

Whether Musk gets his loan is a matter of life and death, of course, so Twitter is giving Musk access to its "firehose," a massive stream of publicly available data that has been paid to other companies over the years, including a feed of more than 500 million tweets per day. Real-time records, tweeting devices, information about tweeting accounts, and more.

▲ Picture from: Mike Blake/Reuters

But that wasn't enough for Musk's team, who, in their view, couldn't verify the data, and Twitter just provided more details in its own way, but it didn't get to the heart of Twitter's business model, nor could it fully and accurately understand Twitter user base.

In response to Musk's "refusal to buy," Twitter's board issued a statement that it still intends to complete the deal at the agreed price and terms and will resort to legal avenues.

Twitter is so determined, as one former Twitter executive put it : "It looks like Twitter is willing to go to war on this deal."

But Musk himself seemed to be lighthearted, and he also used his Twitter account to send an emoji tweet today, four big laughing emojis and four text descriptions, describing his mental journey of acquiring Twitter, as if the situation was developing in In his grasp:

They (Twitter) said I can't buy Twitter, they don't give me bot account information, now they want to ask the court to force me to buy Twitter, now they have to release bot account information in court.

The 44 billion acquisition is far away, and the 1 billion breakup fee is also pending

Twitter is preparing to sue Musk earlier this week.

This already crazy deal could turn into a protracted legal battle that started in the Delaware Chancery Court.

Bloomberg reported that Twitter hired Wachtell, Lipton, Rosen & Katz, a law firm known for corporate law whose partner Martin Lipton invented the “poison pill” in 1982.

Poison pill plan is also known as "equity dilution anti-takeover measures". The board of directors has passed an equity dilution clause in advance. Once a hostile party acquires a certain percentage of the company's shares, the equity dilution clause will take effect immediately, and the company's original shareholders can obtain a large amount of the company's shares at a lower price. , thereby raising the cost of the acquirer.

The poison pill was just the beginning of Twitter's defense against Musk's takeover. But this time the goal is the exact opposite, Twitter's appeal is to complete the acquisition.

▲ Picture from: linkedin

The judge will also decide whether to pay a "breakup fee" of $1 billion if the two parties still can't reach an agreement.

This "breakup fee" was finalized when Musk and Twitter first signed an agreement to prevent the other party from withdrawing for specific reasons.

Musk would have to pay the fee if Musk couldn’t secure the funds needed to complete the acquisition; Twitter would have to pay the fee if Twitter switched to another buyer or if the board recommended shareholders vote against Musk’s acquisition.

Musk emphasized that Twitter violated the terms of the deal by not giving real fake account data, which may mean that Musk is trying to get out without paying a "breakup fee."

Despite Twitter's determination, it's not good for Twitter to stretch the line too long.

In May of this year, because the capital market was not optimistic about the deal, Twitter’s market value shrank by billions of dollars , and the stock price fell to around $46, far below Musk’s $54.20 purchase price. As of Friday's close, Twitter's stock was at $36.81 .

▲ Picture from: Brendan Mcdermid/Reuters

Around the same time, Twitter suspended most of its hiring and fired nearly 100 employees in an effort to cut costs.

In addition, Twitter has slow growth, slow product innovation, and a sluggish advertising business, with $5 billion in revenue in 2021. By comparison, Zuckerberg's Meta sales were $118 billion.

Behind closed doors, Twitter and Musk seem less hostile.

The Financial Times reported that in previous meetings, Twitter CEO Parag Agrawal and Musk have often aligned on running the company, including diversifying revenue, attracting a larger audience, and even relaxing moderation rules.

It's unclear whether Musk will parachute to save Twitter, or push it further into the abyss. If the acquisition fails, Twitter could be a company with a depressed stock price and low employee morale.

▲ References:

Li Ruoqiuhuang, to exorcise evil. Working email: [email protected]

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