Elon Musk’s journey to add social media giant Twitter to his toy box of personal holdings has taken on Homeric proportions since the world’s richest person dropped a $44 billion offer on the table back in April. But it appears a final stanza is about to be written and, like any good pseudo-tragic tale, a happy denouement is nowhere in sight.
Cracks become chasms: Musk’s deal to buy Twitter is now in “serious jeopardy” according to a Friday report from The Washington Post and the SpaceX/Tesla CEO’s team “has stopped engaging in certain discussions around funding for the $44 billion deal, including with a party named as a likely backer.”
At a public level, the diciest issue related to the deal concerns Musk’s contention that Twitter’s self-reported data on how many of its accounts track back to automated spam generators or bots is off the mark. Twitter has long said spam accounts represent about 5% of its accounts, while Musk said he believes the number is much higher.
That loggerhead led to Musk’s May announcement that the deal was “on hold” until Twitter provided user data that could be assessed by Team Musk. Twitter eventually dropped a trove of user information on Musk but, according to the Post, his team has concluded it cannot verify Twitter’s figures on spam accounts and is expected to take potentially drastic action. The person who spoke to the Post said it was likely a change in direction from Musk’s team would come soon, though did not say exactly what the change might be.
Unfollowing the money: While complicated and unresolved data issues may well play a leading role in any attempt by Musk to back out of the deal, industry watchers say there is a much simpler motivation for bailing out.
Despite Musk framing his second thoughts as being solely about Twitter’s spam estimates, the Tesla CEO is likely wary of completing the purchase because the values of both Twitter and Tesla stock have plummeted since he struck the Twitter deal on April 25, according to Ars Technica. The merger agreement itself doesn’t give Musk any easy way out. There’s a $1 billion breakup fee, but Musk can’t necessarily get out that cheaply, and his responsibility could end up being decided in court.
So, now what? A potentially epic legal battle pitting Musk against Twitter could be in the offing.
The terms of the deal ensure that it won’t be easy for Musk to walk away, per the Post. Musk has agreed to complete it unless something major happens to Twitter’s business, and legal experts doubt the bot issue would qualify.
Twitter, which initially fought Musk’s takeover bid, would be a weaker company if the deal falls apart than when Musk first bought a stake, and experts expect Twitter to fight to get it done. Twitter itself has said it intends to complete the deal. Even if Musk convinces a judge to let him walk away, he could still be on the hook for the $1 billion penalty fee.
UPDATE: In a U.S. Securities and Exchange Commission filing that became public Friday afternoon, Musk has declared he wants to terminate his offer to buy Twitter because of a “breach of multiple provisions of that Agreement,” according to a letter filed with the SEC.
See the Deseret News’ latest coverage of this emerging story.