Elon Musk Offers Takeover of Twitter at an Agreed Price; Deal calls ‘Accelerant’ to create application ‘X’


Elon Musk is offering to pursue his initial bid of $44 billion (roughly Rs. 3,58,300 crore) to take Twitter private, security documents showed on Tuesday, calling for an end to a lawsuit filed by the social media company who could have made him pay, whether he wanted to or not. A deal would put the world’s richest person in charge of one of the most influential media platforms and end months of litigation that has damaged Twitter’s brand and fueled Musk’s reputation for erratic behavior.

Musk, the chief executive of electric car maker Tesla, will take over a company he originally pledged to buy in April, but which has rapidly deteriorated. Late Tuesday, he tweeted that buying Twitter would accelerate his ambition to create an “everything app” called X.

Elon Musk against Twitter
photo credit: Reuters

The renewed offer comes ahead of a much-anticipated showdown between Musk and Twitter in the Delaware Court of Chancery on October 17, in which the social media company was to seek an order ordering Musk to close the deal for $44 billion. dollars (about Rs. 3,58,300 crore).

Musk sent a letter to Twitter on Monday saying he intended to proceed with the deal under the original terms if the Delaware judge stayed the proceedings. A source close to the Twitter team told Reuters that during a hearing on Tuesday morning, the judge asked both sides to report back in the evening.

It was not immediately clear why Musk chose to drop out of his fight, although some pointed to his planned deposition.

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

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

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

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

“None of this analysis, as far as we can remotely tell, corroborates what Mr. Musk said on Twitter and told the world,” Twitter attorney Bradley Wilson told the court.

The original deal was “a very seller-friendly deal that would be very difficult to get out of,” said UC Berkeley law professor Adam Badawi. Musk realised, he said, “in all likelihood this was going to force him to close at $54.20 (about Rs 4,400) per share.”

Musk was relatively silent on Twitter during the day, but on Tuesday night he tweeted that “Twitter probably speeds up X by 3-5.”

This 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. Musk also said he wanted to create a money transfer feature.

Funding

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

Musk has used Twitter to stir up controversy, including on Monday when he presented a peace plan for the Ukraine-Russia war that was quickly condemned by Ukrainian President Volodymyr Zelenskiy.

Bloomberg was the first to report that Musk was willing to pay the initial price. Musk also said his offer was conditional on the lawsuits stopping.

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

Musk has already sold $15.4 billion (about Rs 1.25400 crore) worth of Tesla shares since agreeing to buy Twitter.

Musk has also secured a funding commitment from banks – including Morgan Stanley, Bank of America, Mitsubishi UFJ Financial Group and Barclays – to provide a margin loan of $12.5 billion (approximately Rs 1,01,800) to back his acquisition. from Twitter.

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

However, the banks have agreed to provide the funding regardless of whether they can sell the loans and face long legal chances to free themselves from the funding commitment, according to regulatory documents.

Given that Twitter has already received shareholder support for the sale to Musk, the deal could close quickly in the coming weeks if the two parties were to agree on initial terms.

© Thomson Reuters 2022


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