The decisive sentence is at the very end of the five-page letter that Elon Musk’s lawyers sent to the US Securities and Exchange Commission on Friday evening. Mr. Musk, it says, is exercising his right to terminate the agreement to purchase Twitter. It is a dramatic turn in the months-long dispute between the richest person in the world and the influential platform.
Musk announced in April that he wanted to buy Twitter for more than $44 billion. The deal would have changed the social network. Musk repeatedly said that America’s tech companies were too left-wing and that Silicon Valley was suppressing conservative voices. Twitter, on the other hand, according to the billionaire, should become a “hoard of freedom of expression”. Musk even planned to bring back ex-president Donald Trump.
Musk is an entrepreneurial genius, a man who revolutionized the auto industry with Tesla and space travel with SpaceX. The Twitter deal appeared like his attempt to gain political clout as well. Why the exit now?
Musk’s lawyers claim it’s about the number of fake profiles on Twitter. The platform puts it at less than five percent. Musk doesn’t think so. According to the letter to the SEC, Twitter has now failed for months to provide the data needed to verify the five percent claim. This is a serious breach of the terms of the contract and justifies an exit from the deal.
Why didn’t Musk request the information on the fake accounts before signing the purchase agreement? This is called “due diligence”, i.e. the careful examination of the object of purchase – and is the most normal thing in the world when taking over a company. The argument in the lawyers’ letter therefore seems to have been advanced.
It’s more likely that Musk is about the money. He offered shareholders $54.20 a share in April. In recent months, however, Twitter has lost significant value. On Friday, the stock closed at just $36.81.
Musk may have felt that difference was too big to stick with his offer. A minus of 32 percent – that could have been too much for the entrepreneur. After he dropped the deal, Twitter’s stock dropped another seven percent in after-hours trading.
Once again, Musk seems erratic. Like a man who always dances on the line between genius and madness. He never seemed to have been really serious about Twitter. His plans seemed more like a game than an attempt to buy and grow a business.
Musk had announced that he would quadruple the number of active Twitter users: from 230 million to around one billion. But he didn’t say how he wanted to achieve that. No concrete business plan was heard from him, only vague comments on freedom of expression.
How does it go from here? A long, tough legal battle looms. Twitter immediately announced that it would go to court. The platform wants to use legal means to force Musk to complete the purchase. One has to doubt that Musk’s feeling that Twitter has more fake profiles than stated will suffice as a reason for an exit. The contract provides for a $1 billion penalty if either party withdraws. Musk could definitely afford it – the US magazine Forbes estimates his fortune at $ 219 billion.