On Tuesday afternoon, Twitter shareholders voted in favor of Elon Musk’s bid to purchase the social media company for $44 billion, a deal that Musk has been actively trying to cancel.
The decision means that an October trial between Musk and Twitter will proceed, although Musk is still hoping that the court will allow him to terminate the agreement.
Rumors swirled earlier this week that the majority of shareholders were set to vote in favor of Musk being forced to complete the deal based on preliminary voting.
The bombshell announcement came just minutes after Twitter whistleblower and former security executive at the company Peiter Zatko testified before congress.
Two weeks ago, Musk’s legal team sent a letter to Twitter claiming that Zatko’s claims were grounds for termination of the proposed purchase.
Zatko, the former head of security at Twitter, penned an 84-page long complaint against the company in August which claimed that Twitter mislead regulators in that it did not have a solid security plan against spam accounts and bots, also adding that the company was more concerned with overall user growth instead of weeding out the fake accounts.
Musk is claiming that if proven true, the allegations made by Zatko would mean that Twitter has breached part of its agreement with the billionaire, namely that Musk asked that Twitter provide an accurate reporting and methodology of finding precisely how many Twitter users were spam and bot accounts.
Musk has also subpoenaed Zatko in his trial against Twitter, joining the ranks of Twitter founder and former CEO Jack Dorsey whom Musk subpoenaed last month.
Dorsey is being asked to hand over a number of different documents for the upcoming trial, including information on Twitter’s internal metrics, Musk’s merger agreement, and spam and fake bot accounts on the platform.
It’s unclear precisely what information Musk is hoping to get out of Dorsey, but it’s guaranteed to be juicy.
Dorsey publicly backed Musk’s decision to acquire Twitter back in April through a series of Tweets posted shortly after the public learned about Musk’s $44 billion bid to buy the company.
“Elon is the singular solution I trust. I trust his mission to extend the light of consciousness,” Dorsey wrote. “Elon’s goal of creating a platform that is ‘maximally trusted and broadly inclusive’ is the right one.”
Last week, a judge ordered that Twitter must hand over documents from a former executive to Musk as the legal battle began to escalate.
Musk, who attempted to back out of his $44 billion bid to acquire the social media company, cited his reasoning for not completing the deal as Twitter’s inability to provide him with accurate data on how many accounts on the platform are bot and spam accounts.
Per Monday’s new ruling, Twitter will now need to produce documentation from Kayvon Beykpour, the former General Manager of Consumer Product at the company who was a key component and contributor of the spam report that Musk was given when he first attempted to acquire the company back in April.
Earlier this month, Musk changed his tone again on his decision to back out of his bid to purchase Twitter, after a series of Tweets by the billionaire showed that given the right circumstances, the deal could continue on.
Musk responded to a Tweet which pointed out that Twitter reportedly used a “fake data set” when coming up with a number for how many accounts on the platform are spam and bot accounts by saying that the “deal should proceed” so long as Twitter could provide Musk with the information that he’s been seeking.
“If Twitter simply provides their method of sampling 100 accounts and how they’re confirmed to be real, the deal should proceed on original terms,” Musk wrote. “However, if it turns out that their SEC filings are materially false, then it should not.”
The Tesla CEO then doubled down and challenged Twitter CEO Parag Agrawal to a “public debate” about the “bot percentage.”
“Let him prove to the public that Twitter has <5% fake or spam daily users,” Musk said bluntly.
The legal battle between Elon Musk and Twitter began heating up when new court records released at the beginning of August showed that the social media company subpoenaed records from Morgan Stanley and other banks, as well as Musk’s advisers, to use in its trial against the billionaire.
Bank of America, Barclays, BNP Paribas and Citigroup are among the multiple financial institutions being summoned by Twitter in hopes that it will shed light on Musk’s communication with the banks and what the financing of his buyout plan was set to look like.
The subpoenas are also seeking information on if there was any discussion about whether or not the Twitter acquisition would have an effect on the stock price of Tesla, where Musk is CEO.
On July 19, a judge ruled in Twitter’s favor and granted the social media giant’s request for the Musk vs. Twitter trial to be expedited to October 2022.
Musk had pushed for a trial in February 2023, asking for more time to resolve his unanswered questions about spam and bot accounts, and argued that the 7 months were necessary in order for extensive research to be done.
Chancellor Kathaleen McCormick of Chancery Court in Delaware said that delaying the trial would “threatens irreparable harm to [Twitter].”
The trial is currently set for a five-day period.
Original story below.
It’s been a whirlwind three months since Elon Musk first made a $44 billion bid to purchase Twitter, filled with contentious Twitter polls, company-wide town halls and a war on spam accounts and bots. But now, per an SEC filing from Friday, it may be all over.
Musk has pulled out of the deal and as a result, Twitter is suing the billionaire in Chancery Court in the state of Delaware in an attempt to force him to complete the agreement, per court documents dated on July 12.
Here’s a quick look at how Musk and Twitter have gotten here and what comes next for both parties.
The initial purchase
Musk made his initial bid to purchase the company on April 25, 2022.
The billionaire has made a name for himself on the platform where he has garnered over 100 million followers.
Musk purchased the company for $54.20 per share in cash, which was estimated to be valued at $44 billion total. Twitter was set to become a privately held company under Musk if the deal had closed as expected by the end of 2022.
The Tesla CEO said in a letter to Twitter Board chairman Brett Taylor via an SEC filing that his offer to purchase the company was his “best and final.”
“There will be distractions ahead, but our goals and priorities remain unchanged. The decisions we make and how we execute is in our hands, no one else’s,” Twitter CEO Parag Agrawal said in a letter to employees at the time of the initial bid. “Let’s tune out the noise, and stay focused on the work and what we’re building.”
Trouble begins following the bid
The road following the bid was anything but smooth.
Twitter employees and shareholders were less than thrilled about the potential acquisition.
There were reports of employees being up in arms after Musk’s initial bid, something that Agrawal had to handle during an employee all-hands meeting where threats of a “mass exodus” of workers were vocalized.
Following the initial upset, two top Twitter execs (Kayvon Beykpour who was the general manager of consumer and Bruce Falck who served as revenue product lead) left the company as Agrawal announced a hiring freeze.
“Effective this week, we are pausing most hiring and backfills, except for business critical roles as determined by Staff members in partnership with their HRBPs. We will also be reviewing all extended offers to determine criticality and those that should be pulled back,” the Twitter CEO wrote in a memo to employees. “We are not planning company-wide layoffs, but leaders will continue making changes to their organizations to improve efficiencies as needed.”
Musk pauses the deal
One day later, Musk started making waves himself by accusing the company of lying about what percentage of accounts on the site are bots and spam accounts.
In Twitter’s Q1 2022 earnings report, the company disclosed that bots and spam accounts account for less than 5% of total users on the site.
This prompted Musk to put his deal on hold.
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” he Tweeted, linking to a Reuters article from earlier this month that cited Twitter’s estimated data. “Still committed to acquisition.”
Things begin to look up
Musk addressed Twitter employees for the first time in June during a colorful town hall where he talked about his plans to expand Twitter’s user base and talked about why he wanted to purchase the company in the first place.
Following the meeting, things seemed to be “all systems go” per an SEC filing which revealed that the Twitter Board unanimously urged shareholders to approve the pending deal.
“Twitter’s Board of Directors, after considering the factors more fully described in the enclosed proxy statement, unanimously: (1) determined that the merger agreement is advisable and the merger and the other transactions contemplated by the merger agreement are fair to, advisable and in the best interests of Twitter and its stockholders; and (2) adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement,” the filing stated.
Musk pulls out of the deal
On Friday, an SEC filing revealed that Musk had pulled out his bid due to accusations against Twitter and the company’s alleged inability to accurately disclose what percentage of users were bots and spam accounts. His legal counsel said that the company’s inability to do this was a “breach” of Twitter’s original agreement with the company.
Brett Taylor, Twitter Board Chairman, tweeted that the company plans to sue Musk and force him to complete the acquisition.
“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,” he said. “We are confident we will prevail in the Delaware Court of Chancery.”
Musk’s original bid also included a clause that said there would be a $1 billion fee should he choose to terminate the agreement before its completion.
Musk, however, doesn’t seem to be too concerned, Tweeting jokes and memes and taking the situation relatively lightly given how much money is on the line.
— Elon Musk (@elonmusk) July 11, 2022
One of these memes that Musk posted includes four photos of himself indicating that Twitter will now have to disclose the information about the bots in court.
Twitter sues Musk
On July 12, Twitter filed a lawsuit against Elon Musk in Chancery Court in hopes of forcing the billionaire to complete his $44 billion bid to purchase the company.
“Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, Musk apparently believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away,” the lawsuit stated. “This repudiation follows a long list of material contractual breaches by Musk that have cast a pall over Twitter and its business. Twitter brings this action to enjoin Musk from further breaches, to compel Musk to fulfill his legal obligations, and to compel consummation of the merger upon satisfaction of the few outstanding conditions.”
Musk’s only public response to the lawsuit was, naturally, a Tweet.
“Oh the irony lol,” he wrote to his 100 million followers.
Whatever happens next between the two is sure to be a hefty legal battle.
Twitter was up 4.29% at market close on Tuesday.
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