Elon Musk Wanted to Buy Twitter. Or Did He?
Elon Musk would like to get out of his agreement to purchase Twitter. Many in the business press initially reported that Musk had "terminated" the deal, which is a headline that may have pleased Musk but that Twitter’s lawyers would take issue with. He does not have the unfettered power to terminate a binding contract he signed with another party, though this mishigas is likely to put such basic concepts to the test.
There seem to be a few possible scenarios for the outcome:
1) Twitter wins its suit against Musk. He has to buy Twitter for $44 billion.
2) Musk gets out of the agreement and pays the stipulated $1 billion penalty to Twitter.
3) Musk gets the agreement thrown out and pays nothing.
4) Twitter and Musk come to a settlement where he buys Twitter for less than $44 billion.
5) Twitter and Musk come to a settlement where he pays a larger penalty than $1 billion.
As Matt Levine wrote in Bloomberg recently, it seems unlikely that Musk will end up owning Twitter. We can't exactly cross out 1 and 4, but for the sake of simplicity let's just assume he won’t. A settlement like 5 is somewhat more likely, while it seems that Musk is pushing for 2 or 3, which, as Levine pointed out, are functionally the same for Musk. ($1 billion isn't much different from $0 when you have many billions.) Levine broke down the legal strategies it appears Musk will pursue to extricate himself, the foremost of which—or at least the one the public will most easily latch onto—is the notion Twitter has a lot more bots than it says it does, so Musk shouldn’t have to buy it.
Levine poured some cold water on this strategy in part because by all appearances Musk is trying to malign Twitter and scupper the deal. Also, "back when he was pretending to want to buy Twitter, Musk was pretending that he wanted to buy Twitter in order to clean up the bot problem."
But this is the legal track for Musk’s strategy to get out of the agreement. In addition, for some time now it has appeared from Musk’s public behavior that he is also pursuing a second track. A lot of the discussion around this deal is premised on the assumption that Musk either went into all this on a lark and got bored, or genuinely wanted to buy and reform Twitter but can no longer swing it after the market downturn. He doesn’t appear to have done the most thorough due diligence before signing the agreement (he did not "seek from Twitter any non-public info regarding Twitter," the company told shareholders in a proxy statement). Tesla stock has been battered in recent months, and the financial markets, on which Musk’s $13 billion in debt financing depend, are far less friendly places now.
But this assumption doesn’t really grapple with his public behavior, which from almost the moment he signed the agreement has vacillated between a pair of personas, neither of which, on their own, suggest a person who is entirely serious about serving as a trustworthy custodian of the platform.
On April 25, Twitter announced he'd agreed to buy the company at $54.20 a share. (420! Haha!) At the same time he debuted one of his public personas, Magnanimous Champion of Free Speech:
I hope that even my worst critics remain on Twitter, because that is what free speech means
He also set out his policy goals, namely, "enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans." By the next day, though, amid an avalanche of reaction and criticism, he started to lay the groundwork for persona two:
The extreme antibody reaction from those who fear free speech says it all
By “free speech”, I simply mean that which matches the law. I am against censorship that goes far beyond the law. If people want less free speech, they will ask government to pass laws to that effect. Therefore, going beyond the law is contrary to the will of the people.
People began to point out this philosophy was a bit half-baked. However, things so far had pointed toward the possibility that Musk had gone to buy Twitter in the belief he could fix it but without really thinking through what such a fix involved. Then came April 27 and the beginning of The Trolling.
"Truth Social is currently beating Twitter & TikTok on the Apple Store," Musk said. "Truth Social (terrible name) exists because Twitter censored free speech. Should be called Trumpet instead!"
He then added a meme pretty much cooked up in a lab to piss off Twitter Liberals. Then he switched back to the Magnanimous Leader track, calling for Twitter to be politically neutral and piss off both sides equally, and floating end-to-end encryption for Twitter DMs. He also shared some gags, like buying Coca-Cola to put the cocaine back in.
But it was also on April 27 that Reuters published an opinion piece that laid out all the reasons Musk’s bid for Twitter made no sense—particularly given the conflicts it would create for him as a result of Tesla’s business in China—and concluded that Musk would not actually go through with the deal. Various heads exploded.
The next day, Musk returned to the Troll Track, posting a cartoon suggesting that the left has so radicalized the Democrats that a centrist now finds themselves to the right of center. (This is a fantastical argument, considering the standard-bearer of America's conservative party recently attempted to overthrow the government.) But whether Musk believes this and is really a card-carrying Republican now is not really at issue.
The point of highlighting all this naked political trolling is to illustrate that, having signed an agreement to buy Twitter, Musk appears to be casting himself as an unacceptable candidate to own Twitter: The company's employees clearly skew left and were outraged at his offer even before it was finalized. Now their prospective new boss—who's described Twitter as the digital town square and has called for its absolute neutrality—was also regularly demonstrating an anti-left animus.
"The far left hates everyone, themselves included!" he said April 29, in a fascinating porting of the Trump aesthetic. "But I’m no fan of the far right either," he said in a follow-up about 15 minutes later. "Let’s have less hate and more love."
At this point, on April 29, it’s helpful to note that Musk disclosed he'd sold a third chunk of Tesla stock, following previous sell-offs on April 26 and 27, for a total of $8.5 billion.
On May 4, in response to calls for advertisers to force Twitter to uphold its existing content policies after Musk (theoretically) took over, he tweeted out a link to a Daily Mail article about how the campaign was led by "George Soros, Clinton, and Obama staffers." On May 8, the trolling continued: "If I die under mysterious circumstances, it’s been nice knowin ya." On May 11, he shared a meme that suggested media outlets knowingly and regularly publish baseless Nazi accusations.
And on May 13, he began to go public with the bot pretense:
Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users
As part of that tweet, he shared a link to a Reuters article that referenced an SEC filing that included Twitter's bot estimate (of less than 5 percent of users) but didn’t suggest that estimate was wrong. At no point has Musk publicly offered any evidence that the number is wrong, much less drastically wrong in a way that might invalidate his agreement to buy the company.
However, he did offer a good deal more hype and trolling. "The bots are angry at being counted," he tweeted with a laughing emoji later on May 13. "Whoever thought owning the libs would be cheap never tried to acquire a social media company!" he said May 14, "At least, that’s what the lib hivemind thinks haha."
In the ensuing days, he did go back to talking about Twitter's actual product, particularly its algorithms for serving content to users. But then it was back to polling his followers (scientific!) about whether they believed (scientific!) Twitter's bot estimate.
On May 18, he suggested "political attacks on me will escalate dramatically in coming months" shortly before an article was published in Business Insider that reported a payoff SpaceX made to a flight attendant who alleged that Musk had sexually harassed her on the job. Then this, from the guy who pledged to turn Twitter into a politically neutral space for the free exchange of ideas:
In the past I voted Democrat, because they were (mostly) the kindness party.
But they have become the party of division & hate, so I can no longer support them and will vote Republican.
Now, watch their dirty tricks campaign against me unfold …
Judging by the relentless hatestream from the far left, this tweet was spot on
And then, in the next tweet, he tacked back to Magnanimous Leader.
By now the pattern should be emerging: As Musk's public messaging took on two personas—magnanimous and troll—he made himself more and more unpalatable to a large swathe of Twitter users and employees. (He strayed very far indeed from the free-speech principle of allowing Trump back on the platform. While it pisses liberals off, there’s some purchase to that argument when leaders of the Taliban are on the platform.) Simultaneously, Musk started to work in claims about bots as a more nuts-and-bolts mechanism to get himself out of the deal. The result of these parallel tactics was that a lot of people didn't want him to own Twitter, and it appeared that he didn’t want to own Twitter, either.
We have arrived at the thrilling crescendo. After months of hype, cancel-culture memes, legit updates on his companies, baseless accusations about Twitter's bots (in public and through the Washington Post), and trolling liberals, Musk is officially working to extricate himself from the deal.
One likely scenario seems to be that he ends up paying the $1 billion penalty to Twitter, per the provision in the merger agreement he signed. It's not quite the chump change he had to pay to the SEC to settle a securities fraud inquiry in 2018, but it is, remarkably, still chump change. (Remember, Musk had to step down as Tesla chairman after he lied publicly that he'd secured funding to take Tesla private at a premium share price. Once again, $420 was the joke.) A $1 billion penalty also does not seem like such a big deal when you consider that the only material outcome of Musk's Twitter dalliance to date is that he has offloaded $8.5 billion in Tesla shares without a news cycle about how he was offloading Tesla shares.
What news reports about the sale there were, they were wrapped in the assumption that it was for the purpose of financing his purchase of Twitter. None of these news stories mentioned that the guy who had promised his fans he'd be the last money out of Tesla was selling off billions in stock at around $883 per share. (At various points since, Tesla was trading at around $630 a share, though it's bounced back up over $800 currently.) The money was to buy Twitter; if he's no longer buying Twitter, he just has $8.5 billion in cash.
To be clear, we have no way of knowing whether or not Musk actually intended to buy Twitter, even if the Reuters op-ed pointed out early on all of the reasons why it made absolutely no sense. (Another reason? It looks like a miserable job, and Musk's current jobs seem very cool.) Musk may well have sold off the Tesla shares with the genuine intent to go through with the purchase.
It's not like Musk needed the cash, exactly; consider ProPublica's investigation into taxes paid by billionaires, wherein they note Musk has taken out a personal loan against his massive equity holdings. But as Tesla put it in an SEC filing last year, "If the price of our common stock were to decline substantially, Mr. Musk may be forced by one or more of the banking institutions to sell shares of Tesla common stock to satisfy his loan obligations." Tesla shares declined about 19 percent after he sold them off but have recovered some of that value more recently. Musk has sounded off publicly about his dark view of the near economic future. This was also his reasoning, in June, for laying off 10 percent of Tesla’s workforce.
Maybe it wasn’t a good time to take out more loans against his Tesla holdings. Or maybe he really wanted to buy Twitter and it just didn't work out.
From: Esquire US