Elon Musk and the Twitter deal: what has happened and what's next?

It all seemed so promising back in April before the deal for the social media platform turned sour ... now it's back on

The disagreement between Elon Musk and Twitter over his purchase of the micro-blogging site goes before a judge in a Delaware court in October. Reuters
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The Elon Musk “will he, won't he buy Twitter” saga has been rumbling on for a number of months now, and may have finally reached a conclusion.

The controversial deal was heading for the courtroom, after Mr Musk attempted to pull out of the $44 billion acquisition deal.

But in a late twist on Tuesday, a filing with the US Securities and Exchange Commission showed Mr Musk was going ahead with his original offer.

Twitter shares jumped more than 22 per cent to end at $52 on Tuesday.

Here's all you need to know about the situation:

The deal — and why Mr Musk did it

Having built up his stake in the company and then rejecting a seat on the board, an agreement was reached between Mr Musk, the world's richest person and chief executive of electric car maker Tesla, and Twitter's board in April for the social media platform to be sold in its entirety for $44bn.

The plan was for the company to be taken private, with stockholders receiving $54.20 per share, a 38 per cent premium over the social platform's closing stock price on April 1. A regulatory filing showed that Mr Musk was personally committing $33.5bn to the deal, which included $21bn of equity and $12.5bn from margin loans.

Mr Musk, a proponent of free speech, released a statement in which he explained his purchase.

“Free speech is the bedrock of a functioning democracy and Twitter is the digital town square where matters vital to the future of humanity are debated,” he said.

Mr Musk said he wanted to introduce new features and make algorithms open source to increase trust, “defeat the spam bots, and authenticating all humans”.

The reference to defeating the spam bots was a sign of things to come.

A new reason for him buying Twitter came to light amid his about turn on October 3. He tweeted: “Buying Twitter is an accelerant to creating X, the everything app”.

There is no further information on what X, the everything app would entail. However, he did say that “Twitter probably accelerates X by three to five years, but I could be wrong”.

Based on the billionaire’s past comments, that service could look a lot like Chinese super-app WeChat, Bloomberg reported.

He has openly admired the Tencent Holdings' app that’s grown from a messaging service to a mini-internet used daily by more than a billion Chinese.

WeChat is used to book rides, make dining reservations, order food, while users also send each other money, pay for goods and services, and even borrow money. It is basically an all-in-one service combining the uses of apps such as Facebook, Twitter, Uber, Instagram and Substack.

What was the initial reaction to the deal?

It created quite a stir across the financial world, social media and among Twitter employees who were left wondering how their jobs and workplace would be affected.

“Elon [Musk] knows one thing, and that is having things his way … [but] he hasn't given out how he wants to improve free speech,” Naeem Aslam, chief market analyst at AvaTrade, said in a note.

“If the platform is left ungoverned, it could promote racism, hurting its massive user base. There is little to no information on how Elon wants to improve Twitter's platform, although he has provided clues about what he doesn't like in the platform.”

Meanwhile, former US president Donald Trump said that he had no intention of rejoining Twitter if his account was reinstated.

And Saudi billionaire Prince Alwaleed bin Talal, who owns a stake in Twitter through his Kingdom Holding Company, said that Elon Musk would be “an excellent leader” for Twitter after he agreed to retain his $1.9bn stake.

The Wall Street Journal reported in early May that Mr Musk could take Twitter public again after he finalises the deal. He could list it as soon as three years after buying the company, the newspaper reported, citing sources.

Mr Musk gave a brief insight into his plans when he appeared at the Met Gala and said: “My goal, assuming everything gets done, is to make Twitter as inclusive as possible and to have as broad a swathe of people on Twitter as possible.”

Cracks appear

The deal took a turn for the worse on May 13 when Mr Musk said it was on hold pending details on the number of fake accounts on Twitter. He tweeted that he wanted evidence that fewer than 5 per cent of users were spam/fake accounts, but said that he was “still committed to the acquisition”.

Under the agreement, if Mr Musk abandoned the deal, he would have to pay a $1bn break-up fee.

The bots

The bots have remained the thorny issue in the deal.

Twitter chief executive Parag Agrawal hit back at Mr Musk's concerns, saying that spam accounts accounted for less 5 per cent of users and that Twitter locks millions of accounts each week that it suspects could be fake.

However, a study by Israeli cyber security company Cheq showed that bots amount to up to 12 per cent of visits on the social media platform.

“The data suggests that Twitter's bot problem is probably larger than 5 per cent,” said Guy Tytunovich, founder and chief executive of Cheq.

Research company Bot Sentinel estimated that 10 per cent to 15 per cent of accounts on Twitter are inauthentic, according to a Bloomberg report, while Cyabra, a research company with a different methodology, puts the percentage of inauthentic Twitter profiles at 13.7 per cent.

The bot argument has see-sawed ever since, with Mr Musk alleging that he was misled but saying in August that if Twitter “simply provides their method of sampling 100 accounts and how they are confirmed to be real, the deal should proceed on original terms”.

'Swimming naked': a major breakdown

Proof that the deal had truly soured came on July 13, when it was confirmed that Twitter was suing Mr Musk for reneging on the deal. Lawyers for Twitter told a Delaware judge that Mr Musk had failed to honour his agreement to pay $54.20 a share.

The language became more colourful as Twitter said in an SEC filing that Mr Musk's claims he was being “hoodwinked” were “just a story, imagined in an effort to escape a merger agreement that Mr Musk no longer found attractive once the stock market, and along with it, his massive personal wealth, declined in value”.

Mr Musk's counterclaims filed in a Delaware court said: “As a long bull market was coming to a close, and the tide was going out, Twitter knew that providing the Musk Parties the information they were requesting would reveal that Twitter had been swimming naked.”

He accused the microblogging site of having played a “months-long game of hide and seek”.

The court case — what's next?

The courtroom showdown was set to take place from October 17 in Wilmington.

The judge presiding over the Delaware case has yet to publicly weigh in on Mr Musk's new proposal, but what she says could determine the next steps.

Twitter's deposition of Mr Musk — set to begin on Thursday — and even the October 17 trial itself could still go forward if Twitter isn’t assured that the deal is closing, Ann Lipton, an associate law professor at Tulane University, told The Associated Press.

“Twitter is not going to let that proceeding stop until it gets that 100 per cent reassurance,” she said.

Mr Musk doesn't own Twitter yet, and it is still not clear if or when he would take it over.

But if the deal does go through, Ms Lipton said Mr Musk could be in charge of Twitter in a matter of days — however long it takes him and his co-investors to line up the cash.

What happened this week is that his lawyer sent a letter to Twitter saying he will complete the deal as long as he lines up the promised debt financing and provided that the Delaware Chancery Court drops Twitter's lawsuit against him.

Has Mr Musk spoken to Twitter staff?

Yes, he did so in June and conversation moved into the realm of alien civilisations during the 45-minute call.

There was also some serious chat, as he discussed freedom of speech, possible job cuts, remote working and troll farms.

— Agencies contributed to this article

Updated: October 05, 2022, 7:07 AM
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