Elon Musk reverses course again, ready to buy Twitter, build ‘X’ app

Elon Musk will take over a company he originally committed to buying in April 2022, but soon soured on. PHOTO: REUTERS

NEW YORK -  Billionaire Elon Musk is proposing to proceed with his original US$44 billion (S$62.6 billion) bid to take Twitter private, calling for an end to a lawsuit by the social media company that could have forced him to pay up, whether he wanted to or not.

An agreement would put the world’s richest person in charge of one of the most influential media platforms and end months of litigation that damaged Twitter’s brand and fed Mr Musk’s reputation for erratic behaviour.

Mr Musk, the chief executive of electric car maker Tesla, will take over a company he originally committed to buying in April, but soon soured on. Late on Tuesday he tweeted that buying Twitter would speed up his ambition to create an “everything app” called X.

The renewed offer comes ahead of a highly anticipated face-off between Mr Musk and Twitter in Delaware’s Court of Chancery on Oct 17, in which the social media company was set to seek an order directing Mr Musk to close the deal for US$44 billion.

Twitter shares soared 22.2 per cent to US$52 at the close on Tuesday, while Tesla shares rose 2.9 per cent.

Mr Musk sent Twitter a letter on Monday that said he intended to proceed with the deal on the original terms if the Delaware judge stayed the proceedings.

It was not immediately clear why Mr Musk chose to abandon his fight, although some pointed to his scheduled deposition.

“He was about to get deposed and a lot of uncomfortable facts were going to come out,” said professor at Columbia Law School Eric Talley.

Twitter received Mr Musk’s letter and intended to close the deal at the original price, a spokesman told Reuters. Twitter did not say whether it accepted Mr Musk’s offer.

Mr Musk, one of Twitter’s most prominent users, said in July he could walk away without penalty because the number of bot accounts was much higher than Twitter’s estimate of less than 5 per cent of users. Bots are automated accounts, and their use can lead to overestimations of how many humans are on the service, which is important for advertising rates and the overall value of the service.

Twitter’s legal team on Sept 27 said that scientists employed by Mr Musk estimated the number of fake accounts on the platform at 5.3 per cent and 11 per cent.

“None of these analyses so far as we can tell remotely supported what Mr Musk told Twitter and told the world,” Twitter lawyer Bradley Wilson told the court.

The original deal was “a very seller-friendly agreement that would be very difficult to get out of,” said law professor at UC Berkeley Adam Badawi. Mr Musk realised, he said, “in all likelihood it was going to result in forcing him to close at US$54.20 a share”.

Mr Musk was relatively quiet on Twitter during the day, but late on Tuesday he tweeted that “Twitter probably accelerates X by 3 to 5 years”.

That echoed suggestions he made to Twitter staff in June about creating a “super app” or marketplace for different apps and features like WeChat, which is popular in China. Mr Musk has also said he wants to create a money transfer feature.

Financing

A settlement between the two sides would revive fears among Twitter’s users about Mr Musk’s plans for the platform, which has removed prominent politically conservative voices. Supporters of Mr Donald Trump hope that Mr Musk will reactivate the account of the former US president, who was banned after the Jan 6, 2021, attack on the US Capitol by his supporters.

Mr Musk has used Twitter to stir controversy, including on Monday when he floated a peace plan for the Ukraine-Russia war that drew swift condemnation from Ukraine’s President Volodymyr Zelensky.

A settlement at the original price would also allow Mr Musk to finance the transaction without any complications. If Mr Musk and Twitter had renegotiated the price, it would have technically allowed committed backers to walk away.

Mr Musk has already sold US$15.4 billion worth of Tesla shares since agreeing to buy Twitter.

Mr Musk has also secured a financing commitment from banks - including Morgan Stanley, Bank of America, Mitsubishi UFJ Financial Group and Barclays - to provide a US$12.5 billion margin loan to support his Twitter acquisition.

The banks that agreed to finance the acquisition are likely to lose hundreds of millions of dollars on the deal because they would struggle to attract investors to buy the debt, given the downturn in markets since the deal was signed.

However, the banks agreed to provide the financing irrespective of whether they can sell the loans and face long legal odds freeing themselves from the financing commitment.

Since Twitter has already received shareholder support for the sale to Mr Musk, the deal could close quickly in the coming weeks if the two sides were to settle on the original terms. REUTERS

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