Mr. Musk, the world’s richest man, continued creating confusion around his $44 billion acquisition of Twitter on Tuesday, whilst the social media company tried to maintain the deal on the right track. Early within the morning, the billionaire tweeted that “this deal cannot move forward” until he got more details concerning the volume of spam and pretend accounts on the platform.
A couple of hours later, Twitter said it was “committed to completing the transaction on the agreed price and terms as promptly as practicable.” It urged its shareholders to back the bid by Mr. Musk, who gave the impression to be carrying out a public tweet-by-tweet negotiation although he had struck the blockbuster deal to purchase Twitter last month.
Mr. Musk’s increasingly skeptical — and erratic — comments concerning the takeover have kept investors, bankers and Twitter itself guessing about his motives. Some analysts figure that the 50-year-old is attempting to drive down the acquisition price or walk away from the deal altogether. Many were unnerved by his methods, with market-moving pronouncements made off the cuff at conferences or in emoji-laden tweets in the midst of the night.
Yet his comments are consistent with Mr. Musk’s longtime methods of operation, where he often wings it in the most important moments, eschews experts and relies almost solely on his own counsel. Years ago, he said that he had stopped making business plans. And folks near Mr. Musk have said that he had no plan in anyway when he piped up with a suggestion to purchase Twitter last month.
“I believe all of that is just him making plenty of noise and showing the type of headaches that he would cause for the corporate in the event that they were to attempt to litigate this,” said Ann Lipton, a professor of corporate governance at Tulane Law School.
Twitter’s shares fell 8 percent on Monday and rose greater than 3 percent on Tuesday. They were hovering at $38 a share, far below the $54.20 a share that Mr. Musk agreed to pay for the corporate and below where it traded before the billionaire initially revealed in March that he had bought a giant stake in Twitter.
Behind the scenes, the 2 sides are proceeding with the deal: They jointly put out a regulatory filing on Tuesday. Renegotiating a deal wouldn’t be easy for Mr. Musk. Along with a $1 billion breakup fee, the take care of Twitter features a “specific performance clause,” which provides the corporate the fitting to sue him and force him to finish the deal as long as the debt financing he has corralled stays intact.
Mr. Musk, who also leads the rocket company SpaceX and the electrical carmaker Tesla, didn’t immediately reply to a request for comment. Twitter’s board said in an announcement: “The board and Mr. Musk agreed to a transaction at $54.20 per share. We consider this agreement is in one of the best interest of all shareholders. We intend to shut the transaction and implement the merger agreement.”
Mr. Musk’s latest remarks concerning the Twitter deal center on the difficulty of faux accounts on the platform. Twitter has long said in regulatory filings that fewer than 5 percent of its accounts are fake — a figure that Mr. Musk said is difficult to consider. In a tweet published at 3:32 a.m. Eastern time on Tuesday, Mr. Musk said the figure could possibly be well above 20 percent, without providing information to support his claim.
“My offer was based on Twitter’s S.E.C. filings being accurate,” Mr. Musk said within the message.
A part of the explanation that the difficulty of faux accounts has come to the forefront now’s that Mr. Musk didn’t conduct due diligence on Twitter before agreeing to purchase the corporate. Potential buyers often go to extensive lengths to check a goal’s business, customers, growth potential and stock price before making a suggestion. But in keeping with a regulatory filing from the corporate on Tuesday, Mr. Musk told Twitter that completing due diligence on the social media company was not essential before signing an agreement.
Within the filing, Twitter also warned that “if the merger is just not accomplished, and depending on the circumstances that cause the merger to not be accomplished, the worth of our common stock may decline significantly.” Deal uncertainty can hurt company morale and add to worker turnover.
On Tuesday, two vice presidents and one department head notified colleagues they were departing the corporate for brand spanking new opportunities, a Twitter representative said. The departures were earlier reported by Bloomberg.
20% fake/spam accounts, while 4 times what Twitter claims, could possibly be *much* higher.
My offer was based on Twitter’s SEC filings being accurate.
Yesterday, Twitter’s CEO publicly refused to indicate proof of <5%.
This deal cannot move forward until he does.
— Elon Musk (@elonmusk) May 17, 2022
“If the bot figure is so necessary to his assessment of the worth of the corporate, he must have done his due diligence on it before signing the deal,” said Erik Gordon, a professor of business on the University of Michigan. “And he must have added an explicit representation about bots to the contract.”
Mr. Musk has been increase the pressure on Twitter together with his public comments questioning the deal. He began last Friday, tweeting that his purchase was “temporarily on hold” until he could get more details concerning the volume of spam and pretend accounts on the platform. He later followed up saying that he was still “committed” to the deal.
Over the weekend, he tweeted that Twitter’s legal department had “called to complain” that he violated a nondisclosure agreement by discussing its bot sample size of 100. Mr. Musk’s take care of Twitter also has a non-disparagement clause that prohibits him from tweeting negatively concerning the transaction.
Then at a technology conference in Miami on Monday, Mr. Musk said striking a deal for Twitter at a cheaper price was “not out of the query” considering the questions on spam and pretend accounts.
“The more questions I ask, the more my concerns grow,” Mr. Musk said on the event. “So you understand, at the tip of the day, acquiring it must be fixable with an affordable timeframe and without revenues collapsing along the way in which.”
He added that it was a “material antagonistic misstatement” if Twitter said it has lower than 5 percent of faux or spam accounts however the figure is definitely significantly more.
“Material antagonistic change” clauses are utilized by buyers to get out of or renegotiate deals if there was serious harm to a business. But such charges rarely prevail in court. Twitter’s bot count is unlikely to qualify as a cloth antagonistic statement, lawyers said, since Twitter has publicly disclosed similar figures quarterly and there can be no clear change to guage. And Twitter also cautions in its regulatory filings its bot estimates could also be “higher” than it estimates.
Twitter’s deal contract has eight pages of “representations”: effectively guarantees concerning the state of the corporate on the time of the merger, though none pertain on to its count of bots.
On Monday, Parag Agrawal, Twitter’s chief executive, also posted a lengthy thread detailing how the corporate calculates its variety of bots. He said the corporate’s internal estimates for the last 4 quarters “were all well under 5 percent.”
Mr. Musk later responded to Mr. Agrawal’s tweet thread with a poop emoji. He also tweeted on the Securities and Exchange Commission, indicating that he wants the agency to look into the deal. (Mr. Musk has previously been the topic of S.E.C. inquiries.)
In its filing on Tuesday, Twitter also noted the numerous challenges it weighed in deciding whether to simply accept Mr. Musk’s bid. Bret Taylor, Twitter’s chairman, spoke with several institutional shareholders who beneficial that the board consider Mr. Musk’s proposal against the risks of pressing forward as a public company.
Twitter also said that while its management and bankers received interest from other “financial sponsors and institutional investors,” not one of the interested parties recommend a particular counterproposal.
Ele Klein, co-chairman of the worldwide shareholder activism group on the law firm Schulte Roth & Zabel, said Mr. Musk’s shenanigans have put Twitter’s board in a bind.
“It then becomes an issue of, should you’re the corporate, although you’ve a very great fact pattern, how long do you should spend fighting,” Mr. Klein said. “Life’s too short to fight with Elon Musk.”
Mike Isaac contributed reporting.