Why Musk’s Twitter acquisition bid may have been a ploy to sell $8.5bn in Tesla stock

The takeover offer was merely a vehicle to covertly sell Tesla options that were about to expire, Twitter influencers say

A letter from Elon Musk's lawyer to Twitter's chief legal officer said that the company did not meet attempts to share information on fake accounts on the platform. Photo: AFP
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Billionaire Elon Musk’s decision to terminate his transaction to purchase Twitter for $44 billion may have just been a manoeuvre for him to sell $8.5bn in Tesla stock, according to some Twitter influencers.

Although Mr Musk claimed the social media network did not meet requests to offer him relevant business information related to fake Twitter accounts, also known as bots, some have suggested an alternate reason for the Tesla and SpaceX chief executive’s change of heart.

Josh Wolfe, co-founder of Lux Capital, said on Twitter that bots were never the issue for Mr Musk, but a catalyst that allowed him to sell Tesla stock options that were about to expire.

"Entire thing was a clever ruse to SELL + LIQUIDATE $8.5 BILLION of TESLA STOCK (w/plausible excuse for doing it)," Mr Wolfe said on Friday after the announcement.

Mr Wolfe said he estimated there is an 80 per cent chance of Mr Musk paying a $1bn breakup fee, reaping $7.5bn from liquidated stock options and a 20 per cent chance that he spends $100 million on litigation proceedings with Twitter.

"Honestly think he can 'land rockets' but can't fix 'bots'?" Mr Wolfe asked.

Mr Musk, the world’s richest person, made the offer to buy Twitter at $54.20 per share in April.

The offer was eventually approved with Twitter "committed" to the deal, with terms including a $1bn breakup fee if the merger did not go through.

But on Friday, Mr Musk withdrew from the deal, saying Twitter had not heeded his requests for more information regarding spam activity on the platform and its financials, according to a filing with the US Securities and Exchange Commission.

“Mr Musk and his financial advisers at Morgan Stanley have been requesting critical information from Twitter as far back as May 9, 2022 — and repeatedly since then — on the relationship between Twitter’s disclosed mDAU [monetisable daily active user] figures and the prevalence of false or spam accounts on the platform,” Mr Musk's lawyers said in the filing in reference to monthly daily average users.

Henry Blodget, founder and chief executive of Insider, retweeted Mr Wolfe, adding that Mr Musk’s 10-year Tesla options were about to expire, “so he had to sell them”.

“The Twitter bid did allow him to do that without his facing questions about why he was selling. And he sold at an excellent price!” Mr Blodget said in his tweet.

Meanwhile, Twitter chairman Bret Taylor said in a tweet on Friday the company is “committed to closing the transaction on the price and terms agreed upon with Mr Musk and plans to pursue legal action to enforce the merger agreement”.

“We are confident we will prevail in the Delaware Court of Chancery,” Mr Taylor wrote.

Mr Taylor’s tweet was retweeted by Twitter chief executive Parag Agrawal on Friday evening.

Analysts had already expressed scepticism regarding Mr Musk’s ability to complete the acquisition. Although Mr Musk had secured investment pledges from a number of big names — including Oracle founder Larry Ellison and Saudi billionaire Prince Alwaleed bin Talal — his strategy on how to run the company remained unclear, other than his declaration that he wants Twitter to be a platform for free speech.

Updated: July 10, 2022, 7:44 AM
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