When billionaire Elon Musk officially petitioned the Securities and Exchange Commission (SEC) on Friday to get out of his deal to buy Twitter, I once again wondered why the parties involved are going to all this trouble. What were Musk’s motivations for buying Twitter in the first place? And why would Twitter want to make its employees work for a man who doesn’t seem to care much about their company?
These are all highly intelligent and (I think) rational people we’re talking about. But right now, their actions seem cryptic, coded, and performative. Over the weekend, analysts and some people directly involved in the action attempted to make sense of Friday’s bombshell.
Casey Newton, on his Substack newsletter Platformer, starts with a rational reason for Musk’s apparent desire to depart the deal: Musk offered $44 billion for Twitter and planned to borrow against Tesla stock to raise the money. When tech stocks crashed, Musk’s offer suddenly seemed very high, leading to some serious buyer’s remorse.
“And so he resolved to get out of the deal. He would not invest a lot of energy in coming up with a plausible pretext,” Newton wrote. “The same reason he gave for wanting to buy Twitter—that, in his estimation, it was full of bots and spam—could suddenly be repurposed into his reason for not wanting to buy Twitter.”
Musk would go on to tell his lawyers to request from Twitter endless amounts of data related to bots, including some that Twitter could not provide for privacy reasons. The company’s refusal to supply that data, of course, became the basis for Musk’s “breach” of contract claim—his escape hatch from the deal.
But even this sounds like some kind of weird theater. Musk, his lawyers, and anyone involved in the deal who read the merger terms must know that his bots claim won’t hold water. As lawyer and Bloomberg columnist Matt Levine explained back in June, “Musk thinks, or says he thinks, that this representation (that Twitter accounts are less than 5% bots) is not true. But even if he’s right, he can’t get out of the deal, unless it is untrue and would have a ‘material adverse effect’ on Twitter’s business.”
Now Musk and Twitter appear to be headed for the courtroom. Twitter’s chairman of the board Bret Taylor tweeted as much on Friday:
The Twitter Board 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.
— Bret Taylor (@btaylor) July 8, 2022
Now, this whole drama is undoubtedly having an effect Twitter employees, who have to sit by and watch as their potential boss-to-be mocks Twitter leadership and company policies to his 100-million-plus followers on Twitter. Musk also doesn’t appear to respect the years of work done at Twitter to control misinformation and only offered broad-stroke solutions to that complex problem. Little surprise, then, that many Twitter employees are already planning to depart the company, per Newton.
But, on the other hand, stock-owning Twitter employees—including CEO Parag Agrawal—have a lot to gain financially if the deal, which offers a generous $54.20 per share, goes through. Twitter’s stock has taken a beating during Musk’s strange dance with the company.
There could be another, bigger, reason, and it relates directly to Twitter’s prospects for growth. Here’s analyst Ben Thompson writing in his Stratechery newsletter Monday:
“Here is the issue: the single most valuable piece of Twitter right now is its acquisition agreement with Musk, and [Bret] Taylor and the board absolutely do have a fiduciary duty to Twitter’s shareholders to hold Musk to it, even if . . . it is bad for the company.”
So can there be any real winners here (other than the lawyers)?
The thing is, Musk may be playing for things you can’t capture on a balance sheet, or even understand by using common sense. It’s possible that to Musk this whole ordeal is, at least in part, some kind of joke. Levine wrote in Bloomberg:
He seems to find this fun, and why not? When he pretends that he’ll buy a public company, it creates a big drama with him at the center of it. He gets to boss people around, mobilize legions of bankers and lawyers and financing sources and random hangers-on hoping to get the deal done; and then when he gets bored, he can tell all those people to go home. “Haha, got you,” he can say, and they can all have a good laugh, or he can anyway.
There’s precedent here. Musk threatened/pretended to take Tesla private in 2018, a stunt that cost him a $20 million fine, courtesy of the SEC. In some ways, he’s doing the same thing with Twitter; and in the best case scenario, it seems, he’ll face paying Twitter a $1 billion breakup fee.
Since Friday’s pull-out Musk has been having his usual fun with the affair, on Twitter:
— Elon Musk (@elonmusk) July 11, 2022
It’s interesting, and a bit sad, to compare Musk’s apparent attitude about Twitter with that of company cofounder Jack Dorsey (who supported the deal after its announcement April 25). If Musk believes mainly in the drama of the deal, Dorsey is a true believer in Twitter itself.
“In principle, I don’t believe anyone should own or run Twitter,” Dorsey wrote in a tweet April 25. “It wants to be a public good at a protocol level, not a company.” Dorsey explained that Twitter also has to work as a company to survive, and he believed that Musk could set it on a course of solid growth.
No matter how the Twitter deal turns out, we’ll likely always remember this long and weird trip: A time when a jubilant (and very rich), trickster bought—or said he would buy—a very influential social media company, then discarded the deal to move on to his next trick. Once the dust settles, it’s possible the Musk mythos is even larger than before. He may wind up looking more like our generation’s version of Howard Hughes. And he’d probably like that.