On July 8, Mike Ringler, Musk’s lawyer, sent a letter to “Blue Bird”, announcing that his client would cancel the agreement to buy the company. In the letter, the South African billionaire accused Twitter of violating many contents of the agreement, by not providing information about the number of virtual accounts, as well as other data related to this platform.
Meanwhile, Twitter insists that it still wants the deal to happen and will take the case to court.
Accordingly, in April, the CEO of Tesla and SpaceX offered to buy one of the largest social networking platforms in the world for $ 54.20 per share.
Why Musk wants to buy Twitter
Musk is frequently active on the platform, but is also the company’s most critical critic. One of the factors Musk cares about is the “freedom of speech” of social networks.
In addition, he says he wants to improve Twitter with new features and promises to move the service’s algorithm to open source, clean up the spam bot problem, and ensure every user is authenticated.
“Twitter has huge potential. I can’t wait to work with the company and the user community to unlock this potential,” Musk once wrote.
Financial plan for the deal
Even as the richest person on the planet with a fortune of about $220 billion, Musk still needs more “tricks” to secure financing for the acquisition deal.
Initial filings by the U.S. Securities and Exchange Commission (SEC) on April 20 show that Musk pledged $21 billion in equity capital and secured about $25.5 billion in loans through Morgan Stanley and other companies. other financial institutions.
Since then, the billionaire has sold $8.5 billion worth of Tesla shares and raised an additional $7.1 billion from other outside investors, including Sequoia Capital and Larry Ellison (co-founder). setting up Oracle).
On May 24, Musk pledged to increase equity to $33.5 billion for the deal.
Why Musk wants to close the deal
Elon Musk has expressed concern about the future of Twitter, although he has previously said he is not interested in the “economic side” of the acquisition.
In a letter accusing Twitter of violating many parts of the agreement, the billionaire said “Blue Bird” did not respond to requests to provide details of some data, including the platform’s calculation of the number of daily users. day, an important metric for a company that makes money primarily from advertising sales.
In addition, since the two sides reached an agreement, Twitter shares have continuously decreased and the macroeconomic situation has shown many signs of recession. The company’s stock is currently 38% below its closing price on April 1, when Musk publicly owned more than 9% of the shares.
At first, Twitter seemed inclined to decline the offer, but company management took a closer look at it when Musk announced detailed financial plans for the deal.
The “blue bird” chose to dilute the shares to make it difficult for Musk to collect more shares. This tactic also gives Twitter a better position in the negotiation process.
SEC filings show that in March, Musk discussed with Twitter co-founder Jack Dorsey about the future of the social networking platform.
The Tesla CEO also declined a seat on the company’s board, before making a formal offer. In early April, Jack Dorsey said that “Blue Bird” would work best as a public company, rather than as a private company.
What will happen next
Twitter insists it wants the deal done and will seek legal action. According to the content of the commitment, withdrawing from the deal will cost Musk $ 1 billion.
In addition, the agreement also needs to be approved at an extraordinary shareholder meeting, which Twitter has not yet given a specific time for. According to Bloomberg, this meeting could take place in late July or early August.
Daniel Ives, an analyst at Wedbush Securities, said Musk’s latest move is “a disaster scenario for Twitter and the board, as the company will face Musk in a lengthy legal battle. long and exhausting in court”.