Elon Musk Proposes Closing Twitter Deal on Original Terms


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

Twitter confirmed receipt of the letter and said it intends to close the transaction at the original price of $54.20 a share.

Should the parties agree to do so, the proposal would enable them to avert a high-stakes trial set to begin soon and potentially finalize the deal within days. It would represent a major victory for the social-media company.

There are no guarantees that the unpredictable Mr. Musk will follow through with his proposal and close the transaction. The five-day trial, set to begin Oct. 17, could still go forward as planned. Mr. Musk was scheduled to be deposed later this week as part of the preparations for the trial.

Mr. Musk tweeted Tuesday that “Buying Twitter is an accelerant to creating X, the everything app.” He has previously indicated that the name X.com applies to a social-media company he might create if the Twitter deal didn’t happen. Buying Twitter, Mr. Musk said Tuesday, could expedite the endeavor by three to five years.

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

It couldn’t immediately be learned 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 Mr. Musk’s lawyers at hearings and has called his data requests “absurdly broad.” It is possible he rated his odds of succeeding at trial as 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 from 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 communication with potential whistleblowers.

“He has spent months with various attempts to figure out ways out of this deal,” Mr. Talley said. “All those windows had started to close and some of them closed completely.”

Twitter is now arguably in worse shape than it was when Mr. Musk said he was walking away, buffeted by a deteriorating outlook for digital advertising, the emergence of its former security chief as a whistleblower who claimed a range of failures by its management, and uncertainty over the company’s future stoked by Mr. Musk himself.

Twitter will become a private company if Elon Musk’s $44 billion takeover bid is approved. The move would allow Musk to make changes to the site. WSJ’s Dan Gallagher explains Musk’s proposed changes and the challenges he might face enacting them. Illustration: Jordan Kranse

Twitter sued Mr. Musk to follow through with 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 misrepresented the condition of its business, including the number of bots on its platform. Twitter countered that he was looking for a way out after the share price dropped along with the rest of the market.

Mr. Musk had sought to amend his case to incorporate complaints from a former head of security at Twitter who came forward as a whistleblower in August, alleging problems with the platform’s data security and in other areas. The court allowed it, but there are no indications it would meaningfully strengthen Mr. Musk’s case.

Twitter has been adamant that Mr. Musk was obligated to close the deal on its original terms, and legal experts from the beginning expected the company would prevail at trial. Mr. Musk had the challenging task of proving that Twitter misled him to such an extent that the value of the company is drastically 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 strike a settlement agreement ahead of or during the trial.

The majority of such cases do, often with a slight price cut. But it is exceedingly unusual for a buyer to offer to close a deal on its original terms ahead of such a trial.

Mr. Musk eschewed typical deal-making norms from the beginning. He made a single best-and-final offer, avoiding the typical back-and-forth of corporate acquisitions, arguing that civilization was at stake. He originally took Wall Street and Silicon Valley by surprise when he revealed he owned a big stake in Twitter and agreed to join its board before quickly backing out. He followed that up by making his offer without a clear way to pay for it, then caught Twitter off-guard 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 insist on. That could have given him more insight into the prevalence of bots on the platform, an issue that has since appeared to consume him. In the final merger agreement, he gave Twitter the right to sue him to follow through with the deal should he attempt to back out of it.

All the while, he taunted Twitter and its executives on its own platform, criticizing the business and posting cryptic tweets suggesting he could take his offer directly to shareholders in the form of a tender offer should the company not accept his proposal.

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

On July 9, he officially sought to terminate the deal.

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

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