Here is why Elon Musk’s lawyers have declared he is “terminating” his deal to buy Twitter Inc.:
It seems very doubtful that, should this end up being thrashed out in the Delaware Court of Chancery, the court would accept Musk’s arguments if for no other reason than doing so would upend the whole concept of a binding merger agreement and render the court’s own reason for being somewhat moot. The letter is risible. The bit saying one reason Musk can walk away is because Twitter wouldn’t give him a working copy of its own bankers’ financial model is especially delightful, not least because the lawyer who wrote that will forever have his name appended to it.
It is all in keeping with the nature of this deal from the start. Remember how Musk filed (late) as a passive investor in Twitter despite having been in talks with the company’s management according to its own chief executive officer, then got offered a board seat only to reject it? Remember how he declared early on that he would “defeat the spam bots or die trying” only to then cite the spam bots as an insurmountable obstacle? Or perhaps you recall that he led with a “best and final offer” after seemingly the most cursory of due diligence efforts, which some might characterize as bold but others as just rash and a bit odd?
One remarkable aspect of this is how many others freely appended their names, and sometimes millions, to it. Twitter CEO Parag Agrawal can perhaps be forgiven for gushing about “passionate believer and intense critic” Musk getting involved because he had little choice given Musk’s stake and intent; the passion and intensity of Musk immediately reduced Agrawal to a bit part in his own company.
Perhaps more absurd was Twitter founder, former chairman and CEO Jack Dorsey’s declaration that Musk was the “singular solution” to the problem, in Dorsey’s eyes, of the platform being both a “public good” and a company. For good measure, he added: “I trust his mission to extend the light of consciousness.” Too bad Musk’s commitment to that mission failed for want of a Goldman Sachs spreadsheet, I guess.
Musk secured (a loaded term with him) backing from a gallery of Silicon Valley stars and big name funds, to the tune of $7 billion or so. These include Larry Ellison, Sequoia Capital, Marc Andreesen-linked AH Capital Management and Brookfield Asset Management. Prince Alwaleed bin Talal Al Saud, who owns about 4% of Twitter, first rejected the bid as too low. But then, after Musk used the platform to jab the prince about free-speech rights in Saudi Arabia, had an epiphany of sorts, agreeing to roll his stake into the new Twitter and tweeting that Musk would “propel & maximise its great potential.” While all had their own reasons to back Musk, the likeliest common thread was summed up in a generic answer given by Brookfield CEO Bruce Flatt during an interview with CNBC in May. After saying that technology sector valuations had become “more reasonable,” he went on: “… we’ve had a long relationship with a number of investments with Tesla and Elon and therefore, it just, it emanated out of that.”
Musk has built a game-changing electric vehicle maker in the form of Tesla. While I think it’s overvalued, that’s kind of a plus for anyone who actually made money on it. Space Exploration Technologies Corp., or Space X, may not be listed (yet) but is also a staggering achievement. Investors will forgive an enormous amount for that kind of gain and will be ready to sign up and signal their support in the hopes of more to come. Indeed, where others might see needless needling of regulators from the Securities and Exchange Commission to various state and federal autos watchdogs as a risk, those who have reaped rewards from Musk’s ventures will be inclined to view it as just another facet of the maverick mojo of true entrepreneurial genius.
The thing is, though, like Tesla Inc.’s ultra-conflicted acquisition of SolarCity Corp. and Musk’s pretend buyout proposal for Tesla itself, a shambolic pall has shadowed this entire enterprise. Genius isn’t necessarily fungible. The idea that Musk, an uber-troll on Twitter, has the answer to the incredibly thorny subject of content moderation that dogs all of social media, is weird. One motivation for rustling up backers for his bid was to defray his mounting personal financial exposure from the deal as the market slumped. And now, as a last resort, his lawyers have turned the creativity dial up to 11.
In this case, the word “backers” seems interchangeable with “enablers.” When you consider the many passive stakeholders, especially Twitter employees and small investors caught up in it, this looks less like high finance and more like corporate vandalism. Regardless of where it goes from here, for those who participated, it should be an embarrassment of the richest.More From Other Writers at Bloomberg Opinion:
• Actually, Elon, You Can Count the Twitter Bots: Tim Culpan
• Musk Shows Some Buyer’s Remorse With Twitter: Timothy O’Brien
• Matt Levine’s Money Stuff: Elon Musk Needs Money to Buy Twitter
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist covering energy and commodities. A former investment banker, he was editor of the Wall Street Journal’s Heard on the Street column and a reporter for the Financial Times’s Lex column.
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