Elon Musk proposes to close Twitter deal on original terms | Jobi Cool


A lawyer for Mr. Musk made the proposal to Twitter’s lawyers on Monday, according to a copy of a two-sentence letter filed with the Securities and Exchange Commission on Tuesday afternoon.

Twitter confirmed receipt of the letter and said it plans to close the transaction at the initial price of $54.20 per share.

If the parties agree to do so, the proposal would allow them to avert an imminent trial and potentially finalize the deal within days. That would represent a major win for the social media company.

There are no guarantees that the unpredictable Mr. Musk will follow through on his proposal and close the deal. The five-day trial, which is scheduled to begin on October 17, may still go ahead as planned. Mr Musk was due to be ousted later this week as part of preparations for the trial.

Mr Musk tweeted on Tuesday that “buying Twitter is a shortcut to making X, the whole app. He has previously indicated that the name X.com refers to a social media company he may start if the Twitter deal does not go through. Buying Twitter, Musk said Tuesday, could speed up the experiment by three to five years.

Twitter shares, which were suspended for much of Tuesday, rose 22% to $52. That brings them closer to the price Musk agreed to pay when the deal was sealed in April.

It was not immediately clear what prompted Mr. Musk to abandon his battle with the company. Chancellor Kathaleen McCormick, who is overseeing the case, has at times appeared impatient with Musk’s lawyers during hearings, calling his data requests “ridiculously broad.” It is possible that he estimated the chances of success in the trial too low.

Eric Talley, a law professor at Columbia University, said several factors were piling up against Mr. Musk that might have pushed him to offer a settlement. He pointed to recent rulings by the court denying broad discovery, Mr. Musk’s impending deposition and a new development in which the judge asked for more information about his legal team’s communications with potential whistleblowers.

“He has spent many months trying to find a way out of this deal,” Talley said. “All these windows were starting to close and some of them closed completely.”

Twitter is arguably in worse shape now than it was when Mr. Musk said he was leaving, battered by a worsening outlook for digital advertising, the emergence of its former security chief as a whistleblower who alleged multiple missteps by its executives, and uncertainty about the company’s future as Mr. Musk himself pushed.

Twitter sued Musk to follow through on his agreement to buy the company after he tried to back out of the deal in July. He accused Twitter of fraud, saying the company had misrepresented the state of its transactions, including the number of bots on its platform. Twitter responded that it was looking for an exit after the stock fell along with the rest of the market.

Mr Musk had sought to amend his case to include complaints from Twitter’s former chief security officer who came forward as a whistleblower in August, over alleged problems with the platform’s data security and other areas. The court allowed it, but there is no indication that it would strengthen Mr. Musk.

Twitter has been adamant that Mr. Musk was obligated to close the deal on the original terms, and lawyers from the start expected the company to prevail at trial. Mr. Musk had the daunting task of proving that Twitter misled him to such an extent that the company’s value is significantly below what he agreed to pay for it. Still, even the small risk of Mr. Musk prevailing would weigh heavily on a public company like Twitter, and many analysts and investors expected the two sides to reach a settlement before or during the trial.

Twitter will go private if Elon Musk’s $44 billion takeover bid is accepted. The move would allow Musk to make changes to the site. The WSJ’s Dan Gallagher explains Musk’s proposed changes and the challenges he may face in implementing them. Illustration: Jordan Kranse

Most such cases do, often with a small price reduction. But it is extremely unusual for a buyer to offer to close a deal on original terms before such a trial.

Mr. Musk eschews typical deal-making from the start. He made one of the best and last offers, eschewing the typical back-and-forth corporate acquisition, arguing that civilization was at stake. He initially stunned Wall Street and Silicon Valley when he revealed he owned a large stake in Twitter and agreed to join its board before quickly exiting. He followed that up by submitting his bid without a clear way to pay for it, then put Twitter on fire again by unveiling a $46.5 billion financing package a week later.

He agreed to skip due diligence, the deep dive into a company’s health that most buyers demand. It could have given him more insight into the proliferation of bots on the platform, an issue that has since seemed to consume him. In the final merger agreement, he gave Twitter the right to sue him to enforce the deal if he tried to walk away from it.

All the while, he taunted Twitter and its executives on its own platform, criticizing the transaction and posting cryptic tweets that suggested he might take his offer directly to shareholders in the form of a tender offer if the company doesn’t accept his proposal.

One of the first signs that the unpredictable billionaire was getting cold feet appeared in mid-May when he tweeted that the deal was “temporarily on hold” due to concerns about fake accounts. He followed up the early morning tweet a few hours later by saying he was still committed to the deal. Shares in Twitter closed that day and until recently had been well below the price.

On July 9, he publicly attempted to terminate the contract.

Write to Cara Lombardo at cara.lombardo@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

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