Elon Musk says his takeover of Twitter is "on hold".

Already one of the most unusual corporate takeover attempts in modern business, Elon Musk’s $44 billion bid to buy Twitter got a little ...


Already one of the most unusual corporate takeover attempts in modern business, Elon Musk’s $44 billion bid to buy Twitter got a little weirder on Friday.

First, in a pre-dawn tweet, Mr Musk said the deal was on hold. He said he wanted more details about the volume of spam and fake accounts on the platform.

Then, about two hours later, Mr. Musk tweeted again. He was “still committed” to the acquisition, he said, without giving further details.

The seemingly conflicting messages left many wondering if Mr. Musk had cold feet, was trying to drive down the acquisition price, or was looking for some attention. Maybe it was a combination of all three. Twitter shares yo-yoed in response to his posts.

As with many things involving Mr. Musk, it was difficult to know his thinking. He did not immediately respond to a request for comment.

The announcements marked the latest chapter in an ongoing corporate saga that has raised questions about free speech online and the ramifications of putting the world’s richest person in charge of the one of the most influential social media platforms. Mr. Musk has pledged to relax the company’s content moderation policies. Tuesday he said he was going lift ban on former President Donald J. Trump.

While most acquisitions of this magnitude are handled in some choreographed way, Mr. Musk opted for a more improvised approach. He performed limited due diligence about the deal before moving forward, and said in a conference interview in April that he doesn’t care about the details of Twitter’s finances.

On Friday, Mr. Musk demonstrated how his whims can sway a deal.

In his initial tweet, Musk referenced a May 2 regulatory filing by Twitter that included an estimate that less than 5% of Twitter users were spam and fake accounts. He previously said that ridding the platform of fake accounts, bots and spam would be one of his top priorities after taking office.

Twitter has few restrictions on creating an account, and the company has long struggled with spam and bots. But it was difficult to quantify the exact extent of the problem. As of May 2 regulatory filingTwitter warned that it had applied “significant judgment” in calculating the number of bots, and that its “estimate of fake or spam accounts may not accurately represent the true number”, language similar to that used in the company’s previous filings.

Twitter had leaked figures on fake accounts before Mr Musk made his offer, leaving some to view his comments as a tactic to drive down the price of the acquisition or a pretext to possibly pull out altogether. Twitter’s stock was trading at around $41 a share on Friday, down from the $54.20 a share Mr. Musk agreed to pay last month.

Twitter did not respond to a request for comment.

Withdrawing from the deal could get messy. Mr Musk’s deal with Twitter includes a $1 billion break fee if he were to opt out. But the cost to Mr Musk could be much higher if he broke the deal. The contract contains a “specific performance clause” that could require Mr. Musk to pay for Twitter if the debt financing he secured for the deal remains intact.

“A specific performance is a court order saying, Elon Musk, I know you don’t want to, but you agreed to pay for this thing; you have to pay for it,” said Brian Quinn, an associate professor at Boston College Law School who focuses on corporate mergers.

Mr Musk could also try to kill – or renegotiate – the deal by arguing that there was a “significant adverse event.LVMH Moët Hennessy Louis Vuitton tried this approach with its $16 billion acquisition of jeweler Tiffany’s, citing the effects of the coronavirus pandemic. Tiffany’s then sued LVMHwho eventually bought the jeweler at a lower price.

But the bar for such claims is high, the lawyers say. And because Mr. Musk mounted his offer at lightning speed, and without looking deeply into Twitter’s internal records before signing a deal, he may not have a strong case. Twitter could argue that it could have made itself more aware of some of the challenges facing the company and taken more time to look into its business.

Mr. Musk has pledged to use his personal wealth to fund the deal for Twitter, a plan that has been affected by a recent drop in stock prices, including that of Tesla. Tesla shares have fallen nearly 30% in the past month. Mr. Musk is both selling Tesla shares and pledging them as collateral for personal loans to raise cash.

If a deal were to be struck, Twitter’s business challenges could force Mr. Musk to dip deeper into his stock in the electric carmaker to plug any financial holes. And any problems at Tesla that cause its stock to fall far enough could trigger covenants in Mr. Musk’s personal loans that would require him to add more collateral, limiting his ability to invest in Twitter.

Tesla shares rose on Friday after comments from Mr. Musk.

The swings in Twitter and Tesla shares that followed Mr. Musk’s tweets could draw attention. The Securities and Exchange Commission charged Mr. Musk with securities fraud in 2018 after he falsely tweeted that he had secured financing to take Tesla private, sending the automaker’s shares up 6%. Mr. Musk and Tesla paid a $40 million fine for the tweet. Legal action against Mr. Musk over the tweet is ongoing.

“If I were his attorney, I would spend the morning scrambling to figure out what the implications of all of this are under federal security law,” said Faegre Drinker partner and former Securities attorney Marc Leaf. and Exchange Commission.

Mr. Leaf said Mr. Musk should be concerned about how securities regulators might react to Twitter posts that have direct ramifications for the company’s purchase agreement. He also said it was unclear whether Mr Musk’s Twitter posts would require an updated filing with regulators regarding his plans to privatize the social media company, as it is information important to investors. He said Mr. Musk’s lawyers were likely discussing whether to do so at some point today.

Alex Spiro, a regulatory lawyer for Mr. Musk, did not return requests for comment.

Mr. Musk’s tweet on Friday was not the first time he had taken on Twitter’s business. He raised questions about why celebrities and personalities are no longer using the platform. It targeted individual corporate executives who oversee company policies for removing harmful and illegal content.

The fallout from Mr Musk’s offer has created uncertainty within Twitter, a company that is already struggling to add users and generate more revenue. On Thursday, Twitter chief executive Parag Agrawal fired two top executiveshalted new hiring and pledged to cut spending.

Kate Conger and Matthew Goldstein contributed report.

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Newsrust - US Top News: Elon Musk says his takeover of Twitter is "on hold".
Elon Musk says his takeover of Twitter is "on hold".
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