Could The Bankers Be Elon’s “Get Out Of Twitter Jail Free” Card?

It’s a tug of war. Elon is pulling one way and the Twiter board the other. My money’s on Twitter, but only a fool would bet against Elon. The question is: what could Elon Musk do to get out of the Twitter deal of his own making? Let me explain…

Photo by BP Miller on Unsplash

Tug of War

On the 13th of September, Twitter shareholders will vote to support Elon Musk’s takeover of the business. In a note to shareholders over the weekend (inc me), the Twitter board “unanimously recommended” that shareholders “maximise the value” of their investment in Twitter and accept Musk’s offer of $54.20 a share.

Great…except that Musk doesn’t want to buy Twitter anymore.

He wants out and has told the Twitter board the very same.

Now the matter is heading to court to be resolved. The Delaware Court of Chancery sets much of America’s corporate law. The preliminary hearing a couple of weeks ago set a 5 day hearing for mid-October where both sides will make their case.

Twitter’s case is clear. Musk made all the running. He made the offer. He got the deal he asked for. He made his bed. He has to lie in it.

Musk’s case is not so clear. He’s basically got 3 lines of defence when it comes to proving a “material adverse effect” is his get-out-of-twitter-jail-free” card;

• Bots. Twitter’s full of them according to Musk and he didn’t know that at the time.
• Evasion. Musk claims that Twitter have held back on the information he reasonably asked for to conclude the deal.
• Money. The third option is that his $44 billion of financing falls apart. If he hasn’t got the money, he can’t complete the deal, right?

Excuses, Excuses, Excuses

The first two are almost certainly going to fail. They’re bullshit excuses.

Musk claims that Twitter misled the market with a “5%” estimate of the number of bots and spam accounts on Twitter. But it’s now clear that (a) Twitter have never given a number to the volume of fake accounts there, and (b) Musk knew bots were a problem before he signed the deal because he said one of his goals was to clean up the bot problem.