The Takedown of Twitter
Early Stages
One of the most popular social media platforms of 2022 may be under new management … or will it? Elon Musk, CEO of Tesla, has been a long-time user and shareholder of Twitter. He actually has a 9.2% stake in the company, making him the second largest shareholder of Twitter. He is also very active on Twitter and uses it like any other celebrity does. However, he has been previously accused of using Twitter for market manipulation. In 2018, he tweeted that he wanted to make Tesla a private company. This drove the price up, even though he never made Tesla a private company. The SEC got involved and accused him of manipulation. He also has used Twitter to increase the demand for Bitcoin, Dogecoin and Ethereum. After one of his posts highlighted cryptocurrency, the crypto market shot up. He has a large following on Twitter and can get people's attention easily. This has led him to point out flaws in the platform and take polls from his followers. He wants Twitter to be a place where people can express themselves and their freedom of speech. He wants this available globally, and strongly believes in the potential of Twitter. Twitter decided to have a meeting to discuss Elon Musk’s growing stake in the company and his ideas for the future of the platform. Twitter CEO Parag Agrawal said “He's both a passionate believer and intense critic of the service which is exactly what we need on @Twitter, and in the boardroom, to make us stronger in the long-term”. They offered Elon Musk a spot on the Twitter board. He was scheduled to join the board on April 9th.
Initial Offer
On April 9th 2022, Musk declined the offer. Instead, he presented Twitter with a new proposal. He offered to buy the company at $54.20 per share, totaling $43 billion. Musk stated, “Twitter needs to be transformed as a private company”. He was also unhappy with the current team working at Twitter. Musk has no problem with firing people who disagree with him in his other companies, leading current Twitter leadership to worry about losing their jobs. Twitter had previously allowed many employees to work remotely, but Musk thinks that working in person is the most efficient. He publicly criticized many aspects of Twitter, including their products, executives and policies. He particularly wanted to change the advertisement team because he wanted them to have entertaining ads without selling bad products. He wasn’t satisfied with the current work going on at Twitter. If he bought the company, many of their jobs would be cut. To counteract this, Twitter adopted a poison pill. This allowed stockholders (not including Musk) to purchase shares for less money than usual. In turn, this diluted Elon Musk’s shares in the company, making it more expensive for him to buy the company. If any individual or entity obtained 15% or more of the company, the poison pill would trigger. It seemed as though the Twitter board had dodged a bullet. However, Elon was undeterred. His security filings show that he has collected $46.5 billion dollars of financing to possibly acquire Twitter. His original finance plan had $13 billion in loans from seven different banks, $21 billion of his personal cash and a $12.5 billion loan against his shares in Tesla. He also raised money from several different entities. In a pitch to investors, he claimed he would quintuple the company's revenue by 2028 after he takes over. Some of the entities were his friends, and some were other companies. For example, Ben Horowitz, founder of venture capital firm Andreessen Horowitz, financed $400 million dollars. He later tweeted “We believe in Elon’s brilliance to finally make it what it was meant to be”.
Resistance to the Deal
It seemed as if many people would be thrilled to have Elon Musk take over, considering his passion for wanting to change Twitter for the better. On April 25, 2022, Twitter announced their acceptance of the offer of $44 billion dollars. Elon planned to change quite a few things. He values freedom of speech, and planned to reverse the ban on former president Donald Trump. Some changes aren’t as good as others. For example, Twitter went into a hiring freeze. This is because Twitter didn’t hit their anticipated revenue milestone. They made less money and had less users than they expected, so in order to cut costs they laid off 30% of Twitter's talent acquisition team. Soon after, three key executives left Twitter. The VP of product management Ilya Brown, VP of Twitter Service Katrina Lane and Head of Data Science Max Schmeiser all left the company. Additionally, concern for the amount of bot and spam accounts surfaced. This caused Elon Musk to tweet out that the deal is on hold. Although he had still committed to the deal, he said he needed more information about these accounts. This led him to consider offering a lower price to buy Twitter or abandoning the acquisition completely.
Twitter Strikes Back
As Twitter sensed Elon backing out of the deal, they claimed, “Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests”. To counter this argument, Elon said that Twitter didn’t supply him with accurate data about the spam accounts and bots. He also brought up that Twitter fired two important executives with no warning. General Manager, Kayvon Beykpour and Revenue and Product Lead, Bruce Falck had to leave the company because of the challenging economy. To retaliate to Musk’s buyer’s remorse, Twitter’s lawyers later sent him a letter accusing him of backing out of the deal for other reasons. They said he saw that going through with the acquisition would negatively affect his wealth, and used the spam account data as an excuse to back out. Twitter filed a lawsuit against Elon Musk. It will take place in September and is expected to last four days. If he doesn’t wish to go through with the court hearing he could pay one billion dollars for a break up fee and walk away. Each side is getting their best evidence ready to use against each other, as well as their best lawyers and resources. Will Elon Musk be able to escape the acquisition deal?