Musk posted a unilateral statement that the acquisition of Twitter Inc is "pending". This comes after scathing criticism of the social media company's handling of spam accounts and a "poop emoji" directed at Twitter CEO Parag Agrawal. These are just a few of Elon Musk's tweets over the past four days, culminating in the Tesla CEO's suggestion at a conference in Miami on Monday that his $44 billion contract could be renegotiated to a lower price.
Elon Musk posted this tweet on May 15, indicating that Twitter's news feed classification algorithm is made in such a way that it "manipulates/amplifies" our viewpoints.
Twitter believes Musk's comments violated the non-denigration terms of its Twitter purchase agreement, according to people familiar with the matter. Yet the San Francisco-based company has not taken legal action against Musk for what it considers his "trolling" of the deal, and only plans to do so if he fails to perform the tasks necessary to complete the transaction, the sources said.
One of the sources involved in the deal added that Twitter was trying to "block out the noise."
The number of fake accounts and bots are blocking negotiations
Musk's representatives have continued to work with Twitter, the sources said. They have prepared information to submit to regulators and, if they continue to cooperate, Twitter plans to depose its statement of intent as early as this week, which will explain to its shareholders how the deal worked out, the sources added.
At the same time, some Twitter executives and advisers are concerned that Musk is laying the groundwork to renegotiate the deal and are preparing to defend the deal in court, the sources said. They noted that Musk's comments about the deal were becoming increasingly negative. "The more questions I ask (about the spam account issue), the more my concerns grow," Musk said at the Miami conference Monday.
The sources asked not to be identified because they were discussing confidential planning for the deal. Representatives for Twitter and Musk did not respond to requests for comment.
Some of Twitter's executives were not pleased with Musk's comments. On Monday, Agrawal took to Twitter to defend the company's method of counting spam accounts, while Twitter President Bret Taylor tweeted on Friday that "we remain committed to our agreement."
Twitter shares closed Monday's trading session at $37.39, 5 percent lower than before Musk revealed on April 4 that he had accumulated a stake in the company, and 31 percent below the deal price of $54.20 per share. This indicates that investors consider it very likely that Musk will walk away or renegotiate the deal at a lower price.
Twitter continues to provide Musk with spam account information, the sources said. Musk is entitled to that data as part of his proposed acquisition of Twitter, according to the terms of his agreement with the company. Musk questioned the accuracy of public information provided by Twitter that these accounts represent "well under 5 percent" of its user base. Twitter clarified that this was an estimate. Independent researchers have estimated that 9 to 15 percent of the millions of Twitter profiles are bots. Musk said Monday that he suspects bots make up at least 20 percent of Twitter users.
One concern about Twitter sharing information with Mr. Musk is that it could violate its non-disclosure agreement with the company and share confidential information about its platform and its users, one of the sources said. Musk has argued that Twitter needs to make more information public about how its platform works.
Waiving due diligence
Musk, the world's richest person, waived due diligence when he agreed to buy Twitter on April 25, in an effort to get the San Francisco-based company to accept his "best and final offer." Since then, technology stocks have plunged amid investor concerns related to inflation and the economic downturn.
Musk is contractually obligated to pay Twitter a $1 billion breakup fee if he doesn't complete the deal. But the contract also contains a "specific performance" clause that a judge can invoke to force Musk to close the deal. In practice, acquirers who lose a specific performance case are almost never forced to complete an acquisition and typically negotiate a monetary settlement with their targets.
Wedbush Securities called Musk's invoking of spam accounts to put the deal on hold a "puppy dog excuse," given that the company has made the same statement about it since its 2013 IPO. "The harsh reality for Twitter is that no other strategic/financial bidder will come close to this deal and Musk knows it," wrote Wedbush analysts.
The latest development in this saga came today, as Twitter published its account of its deal negotiations with Musk. It shows that the Tesla CEO did not ask any questions about spams and seemed to be in a rush to close the deal...