Elon Musk’s relationship with Twitter is developing unpredictably. Even before the acquisition story, Musk, as an active user of this social network, often complained about spam responses under his posts. Finally, on April 13, he sent a letter to the Director Board of Twitter with an offer to buy the company for $54.20 per share in cash. Then he wrote on its page: “We will defeat the spam bots or die trying!”.
On April 25 purchase of Twitter was agreed. A joint statement announcing the event used a quote from Mask. He promised to “make Twitter better”, among other things, by “defeating spam bots”.
Even more bizarre seems his recent statement, where Elon Musk announced the suspension of purchases via spam bots on Twitter. Trying to overcome them first, he is now demanding confirmation from the company that the share of fake accounts do not exceed the declared 5% of all active users. He later responded with “poop” emoji to Twitter CEO’s attempt to explain anti-spam policy.
What happened, Elon?
According to Bloomberg analyst, Elon Musk is lying. Spam bots are not a reason to postpone the deal because it was through them that he started buying Twitter. Musk did not provide any evidence that Twitter’s assessments were incorrect or unfair. Moreover, Twitter estimates were known before the deal. The company reported 5% of bots over the past eight years.
No new information about spam bots has appeared in the last three weeks. However, during this time, prices for technology stocks fell as a result of which the $54.20 per share offered by Mask became too high. The share price of Tesla Inc., which was supposed to help Musk partially finance the purchase, also fell. It has fallen by 30% since the proposal.
Elon Musk has become poorer due to fluctuations in stock prices, and the price of $54.20 per share has become excessive in the current environment. For obvious market reasons, he is trying to re-evaluate the deal, but under the terms of the contract, he can not do so just because the shares fell. That’s why Musk misleads the public and pretends that he is the victim in the bot situation.
This isn’t the first time Musk has changed his mind about Twitter. First he purchased only 9% of the company’s shares, later signed an agreement under which had to join the board of directors and not buy more than 14.9% of shares. Four days later, he terminated the deal and said he wanted to buy the entire company.
The current situation is inconvenient for Twitter. Even if they familiarize Mask with the methodology of counting bots and provide evidence that their share does not exceed 5% it is unlikely to change anything. Elon Musk does not want to be persuaded, he wants to lower the price.
Twitter can compromise and renegotiate the deal at a lower price. For example, $42 per share. However, this does not guarantee that Musk will not violate the agreement again, as it was before. Attempts to force him to comply with the current conditions would also be detrimental to the company.
The agreement allows Twitter to sue “for specific results”, so they can ask the judge to order Mask to close the deal. However, no one can guarantee that it will work. If Musk openly ignores the agreement, and the judge can do nothing about it, it could hurt the rule of law rights in general and trust in corporate law in particular. However, the billionaire already has experience of ignoring court orders, and gets away with it.
Another option for Twitter is to expel Elon Musk from the company. But it is unlikely that they will do so.
According to a Bloomberg analyst, Twitter does not have a good way out. The market leads to the fact that the deal will still be renegotiated at a lower price – and Musk will get the desired result in bad faith.
So far, Elon Musk has not sent any official announcement that the deal will be terminated. Ignoring may be the best option for Twitter. The company can pretend that everything is going according to plan and the deal is going to be closed, get the approval of shareholders and regulators and then come to Mask ready to close and see how serious he was.
However, the biggest problem is that Elon Musk changes his mind too often. This time he can do it again.