Musk u-turns again to buy Twitter at his original offer. But why?
According to a report from Bloomberg News, Elon Musk has informed Twitter that he is once more prepared to purchase the business at his original offer of $54.20 a share. This news is also supported by an official U.S. Securities and Exchange Commission (SEC) filing from the 3rd of October 2022.
"Elon Musk is proposing to buy Twitter Inc. for the original offer price of $54.20 a share... Musk made the proposal in a letter to Twitter, according to people familiar with the matter, who asked not to be identified discussing confidential information," states the Bloomberg report.
"Lawyers communicated the proposal to Twitter's lawyers overnight Monday and filed a letter confidentially with the Delaware Chancery Court ahead of an emergency hearing on the matter scheduled for Tuesday," added the Wall Street Journal on the news of Musk's apparent change of heart.
This news is surprising, but the timing may have to do with the information being released less than two weeks before a trial determining whether Musk would be compelled to complete the transaction.
Originally, on the 25th of April 2022 to be exact, Musk made a storm when he committed to purchasing Twitter. But, by the 8th of July 2022, Musk attempted to pull out of the agreement over concerns around information related to bot numbers and potential fraud by Twitter.
Later, the $44 billion acquisition was demanded of Musk by Twitter in a lawsuit filed in Delaware Court of Chancery. The resulting five-day trial was set to begin on the 17th of October 2022. Not only that but Musk was scheduled to testify in a deposition later this week.
"If Twitter accepts the proposal, the two sides wouldn't have to follow through on a five-day nonjury trial set to begin October 17. There are no guarantees they will reach a deal and the trial could still go forward as planned," explained the Wall Street Journal.
In response to the Bloomberg article and SEC filing, trading in Twitter stock was momentarily suspended. However, the stock price increased about 13% when trading started again, reaching $47.93.
There may be more than meets the eye with Musk's apparent U-turn, however
Musk's decision may have been influenced by a couple of crucial pre-trial decisions lost by Musk in the Delaware court. Judge Kathaleen McCormick, for instance, rejected his request to postpone the trial until at least February 2023.
"The reality is delay threatens irreparable harm to the sellers," she argued.
As previously mentioned, Musk's attempt to withdraw from the deal is based on his belief that Twitter's spam projections are far from accurate. Twitter, however, claims that less than 5% of Twitter's monetizable daily active users (mDAU) are spam or phony. Many real users, however, believe Twitter's response may not be entirely accurate.
It has also been claimed by some that Musk's recent experience with Twitter polls and posts, especially centering around the Ukraine War, may have also influenced his decision. The recent leaks of his private messages may also have played a role.
Twitter also noted that Musk's attempt to refute the estimate depended on a technique that flagged his account as perhaps a bot. Twitter claims that Musk "forwent all due diligence" when making a take-it-or-leave-it offer to Twitter and that, as a result, he has no right to back out of the contract based on spam statistics.
Twitter is allegedly not going to respond to Musk's latest proposal immediately and, if the merger does go through, would prefer the court supervise the procedure.
"Twitter is considering whether to accept the proposal, and will not act for at least another day, according to one of the people [familiar with the negotiations]," The Washington Post reported.
"Because there is great distrust on both sides, Twitter leaders are questioning whether the letter represents a legal maneuvering, this person said," they added.
"The court held an emergency hearing Tuesday morning with both sides," added the Washington Post.
"Musk was willing to drop the case but Twitter wanted assurances that the court would oversee the process because of the distrust, one of the people said. There is another hearing scheduled later Tuesday," they added.
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