Story So Far: Elon Musk's Twitter takeover bid
Ahead of legal battle, Musk reignites Twitter takeover bid.
Bhumika Oak | Tesla CEO Elon Musk has declared that he has decided to move forward with the acquisition of buying the microblogging platform Twitter for $44 billion as of October 4, just prior to the Twitter lawsuit trial set to begin on October 17 in the Delaware Court of Chancery. Twitter said it will close the deal after receiving Musk’s offer.
Elon Musk’s potential acquisition of Twitter has been in the news since April of this year. However, a lot has happened during in the last six months, from Twitter resisting Musk’s takeover of the social media network to it suing Musk after he backed out of the $44 billion buyout offer in July.
As Elon Musk and Twitter prepare to fight each other in court, here is a timeline of what happened since the richest man in the world declared his intention to take over Twitter.
Since the beginning of this year, Musk began to increase his Twitter ownership. He started buying Twitter shares on January 31, 2022. His ownership in the microblogging platform grew to 5 percent by March 14. Since March, Musk has been criticising the social media platform, expressing concerns over 'free speech'. “Worried about de facto bias in the Twitter algorithm having a major effect on public; Twitter algorithm should be open source,” Musk tweeted on March 24.
In one of his tweets, posted on March 25, he questioned his followers in a poll, “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?” In another tweet, Musk asked Twitter users, “Is a new platform needed?”
Following this, various users started commenting on the Tesla, Inc.’s CEO’s tweet suggesting him into buying Twitter instead. Later he tweeted that he is giving ‘serious thought’ to creating a substitute for Twitter and questioning whether Twitter ‘undermines democracy’. He then personally reached out to his friend Twitter co-founder Jack Dorsey along with the board members of Twitter.
Around the same time, Musk initiated conversations with Twitter’s CEO and other board members regarding the possibility of joining the board after privately informing them of his growing stake in the company on March 27. Later regulatory filings indicate that Musk also made a mention of setting up a competitor or taking Twitter private.
Musk acquired a 9.2 percent stake in Twitter, making him the company’s largest shareholder as of April 4. He made an investment of 73.5 million shares of common shares, worth about $3 billion.
CEO Parag Agarwal made Musk’s appointment to the Twitter public under the condition that he only acquires 14.9 percent of the company’s shares with a tweet “it became clear to us that he would bring great value to our board” on April 5. Musk then proposed to introduce the long-awaited ‘edit option’ for the microblogging site's 280-character format. While Twitter denied having anything to do with the modifications suggested by Musk, the company claimed that it is developing an edit option that will first be tested on the paid service Twitter Blue.
On the official day to join the Twitter board, April 9, Musk informed the company that he would be rejecting this offer. The news was kept on hold for roughly 36 hours for Musk to change his mind. His name was listed as one of the board members throughout the weekend, during which the public was clueless.
Elon has decided not to join our board. I sent a brief note to the company, sharing with you all here. pic.twitter.com/lfrXACavvk— Parag Agrawal (@paraga) April 11, 2022
On April 10, Parag sent a note to the company and tweeted a note publicly on Elon’s denial to join the board. Musk suggested three additional modifications: the addition of an authentication mark for users of Twitter Blue, the transformation of Twitter’s headquarters in San Francisco into a shelter for the homeless and the removal of the ‘w’ for the term ‘Twitter’ from the social media platform.
After Musk's decline to join the board of Twitter; amended disclosure with the SEC was filed by him on April 11, which means he can now buy as many shares as he wants.
A group of investors in Twitter on April 13, filed a complaint in the New York Federal Court claiming that Musk delayed disclosing his stake in the company in order to purchase more shares at a lower price.
On April 14, the CEO of Tesla made an offer to acquire the microblogging site, Twitter worth $41.39 billion for about $44 billion on April 14.
In an effort to prevent a hostile takeover, Twitter’s board cooperatively adopted a “poison pill” defence in response to Musk’s proposed offer on April 15 that allows shareholders to purchase shares at a discount if any shareholder crosses 15 percent of ownership. This would effectively weaken the billionaire’s share. This plan’s motive was to make sure that any person can take control in the open market by paying all shareholders an amount.
On April 19, the New York Post reported that Musk is willing to invest an amount up to $15 billion of his own money and borrow against his twitter bid to go through with the deal. He retained Morgan Stanley to consider the buyout. Musk said, “Board salary will be $0 if my bid succeeds, so that is $3M/year saved right there.” A document with the SEC shows that the CEO of Tesla has $25.5 billion in debt financing from Morgan Stanley and other financial institutions. Musk lined up $46.5 billion in funding on April 21.
The deal between Musk and the board of Twitter to sell the microblogging site for $44 billion and take the company private was signed on April 25. Musk said he would prioritise free speech on Twitter and add new features. Twitter said that the deal is expected to close in 2022.
According to the regulatory filings, Musk sold $8.5 billion worth of Tesla shares to acquire Twitter on April 29.
On May 5, For the Twitter deal Musk raised $7 billion from a diverse group of investors, including Oracle co-founder Larry Ellison.
On May 10, Musk criticised Twitter's ban on former US president Donald Trump, that was imposed on him following the riots that took place at the US Capitol Hill on January 6, 2021. Musk said he would ‘reverse Twitter’s ban’ of former President Donald Trump, calling the ban a ‘morally bad decision’ and ‘foolish in the extreme’.
When the richest man in the world seemed truly interested in purchasing Twitter, one of the most heated problems surrounding the sale was Musk's concerns regarding free expression. He calls himself a 'free speech absolutist' and he has expressed worries about the platform's algorithms that choose which posts a user sees. He expressed concerns about 'tweets unexpectedly being promoted and downgraded with no visibility into what is going on in an interview before he decided to purchase the company. He suggested an open-source algorithm to deal with this.
However, many Tesla employees have varied opinions. When it comes to 'free speech' by his staff, Musk is reputed to be less accepting. For instance, his business requires Tesla employees to sign non-disparagement agreements that have no expiration date. An employee is forbidden from disparaging the business, its goods, or its services in any form of communication under this non-disparagement. Trials in court may result from breaking the provision. In other words, Tesla employees are not allowed to tweet about the company's wrongdoings or speak with a reporter who is doing an expose on the company's internal issues.
After pointing out the number of spam-bot accounts on social media platforms, Musk suspended the Twitter deal for a while. He stated that spam or fake accounts account for less than 5 percent of Twitter’s active users. The CEO Tweeted on May 13 that $43 billion bid to buy the company is ‘on hold pending details supporting calculation that spam/ fake accounts do indeed represent less than 5% of users.’ Following this tweet, he again tweeted, “still committed to the acquisition.”
Less than 5% of Twitter daily users are fake/spam— Elon Musk (@elonmusk) August 6, 2022
On June 6, Musk said that he will end the Twitter deal because the company does not give him enough information about spam-bot accounts. Twitter responded by saying it will sue Musk to keep the deal when he said he will ‘abandon his offer to buy Twitter. Twitter had been sharing information with Musk ‘‘in accordance with the terms of the merger agreement’’, said Twitter in a statement.
‘’The purported termination is invalid,’’ an attorney representing Twitter said on Musk’s effort to cancel the acquisition in an email, debating that Musk had ‘’knowingly, intentionally, wilfully, and materially breached the Agreement.’’ The attorney added, “As it has done, Twitter will continue to provide information reasonably requested by Mr. Musk under the Agreement.”
After all this, on July 11, Musk backed out of the Twitter deal, following which the shares of Twitter fell. Twitter sued Musk for not completing his deal in Chancery Court in Delaware on July 12. “Musk refused to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests,” said Twitter in the lawsuit. “Musk apparently believes that he unlike every other part subject to Delaware contract law is free to change his mind, trash the company disrupt its operations, destroy stockholder value, and walk away.”
However, Musk did not respond to this lawsuit immediately. It was then said that Musk might be forced to pay $1 billion termination fee if he cancels the deal. The Musk-Twitter legal dispute shall go to trial in October, said a Delaware judge on July 19.
Meanwhile, on August 23 a former head of security at Twitter Peter Zatko alleged that the company misled regarding its cybersecurity measures to exterminate fake accounts. Musk used the whistleblower as a new reason to end his deal with Twitter. Zatko, who worked at the company from November 2020 to January 2022, was held responsible by Twitter, saying he was spreading a ‘false narrative about Twitter’ and was fired for ‘ineffective leadership and poor performance.’ While testifying to Congress three weeks ago, he said that Twitter prioritises profit over safety.
Elon Musk has to figure out how to finance a $44 billion takeover of Twitter by October 28. A breakdown of Musk’s financing plan shows that the billionaire still needs to secure $22.4 billion to cover the equity financing portion of the deal https://t.co/cFTKmrK1g4 pic.twitter.com/1p7Bw2ApTt— Reuters (@Reuters) October 7, 2022
In an unexpected move, Musk has introduced another story twist. The billionaire made a proposal on Monday night (October 3) that could conclude the bitter legal battle after months of trying to back out of the agreement he reached in April. Twitter issued a brief statement in which it acknowledged receiving Musk's letter and reaffirmed its commitment to completing the transaction.
Both parties would be able to avoid the nasty trial that was scheduled to begin in Delaware Chancery Court in two weeks with a settlement. Musk, the CEO of the electric vehicle manufacturer Tesla and senior Twitter executives would have most likely testified during the trial. A legal document states that Musk will be deposed on Thursday and Friday in Austin, Texas.
However, a New York Times report now states that this deal could now be significantly more costly for lenders like Morgan Stanley, Bank of America and Barclays, on whose money the deal rests, that had committed to investing into the deal before inflation, rising interest rates, the economic uncertainty created by the war in Ukraine, etc. As of Wednesday, the banks had not commented on the same.
Despite having a far smaller active user population than its competitors Facebook and Tiktok (330 million), Twitter does have power. Because so many politicians, journalists, activists, and intellectuals frequent the website, it has a significant impact on public discourse and the media. Musk's buyout to take the company private has created hopes as well as worries and hopes that he may strengthen the company.
The American Civil Liberties Union has expressed concern over a billionaire taking over Twitter. Back in April, the organisation had tweeted, "we should be worried about any powerful central actor, whether it is a government or any wealthy individual - having so much control over the boundaries of our political speech online." The deal was termed as 'dangerous' by US Senator from Massachusetts Elizabeth Warren.