On April 25, Elon Musk made a $54.20-a-share, or $44 billion, bid to acquire Twitter (TWTR) .
At first, the deal appeared to be a victory for the billionaire and Tesla (TSLA) CEO, who would have taken control of an influential opinion platform frequented by millions of average folks and the powerful, including political leaders, celebrities and trendsetters.
“Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated,” the tech tycoon said in a statement announcing the deal.
“I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans.”
A little less than three months later, on July 8, after public standoffs with the social network’s management. Musk decided to end the blockbuster deal, citing a “material breach” of the terms.
Bots or Putin
In a Securities and Exchange Commission filing, Musk had said he wanted to end the deal because of disagreements about the number of spam bots, or fake accounts, on the platform.
Musk “is terminating the merger agreement because Twitter is in material breach of multiple provisions of that agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the merger agreement, and is likely to suffer a company material adverse effect,” Musk’s lawyers wrote.
For its part Twitter had always said that fake accounts made up less than 5% of its total accounts.
Faced with the tech mogul’s about-face, Twitter sued him in Delaware Chancery Court. A five-day trial is scheduled to start Oct. 17, a week before the Oct. 24 deadline the two sides had set to finalize the deal. Twitter is asking the court to compel Musk to make good on his commitment to buy the platform.
Recent hearings before Chancellor Kathaleen McCormick have disclosed messages Musk sent on May 8 to a Morgan Stanley banker. In them the billionaire explains that it does not make sense to continue the transaction if the world is headed into a third world war. Morgan Stanley was a financial partner of Musk in the deal.
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Musk cites a May 9 speech by Russian President Vladimir Putin, whose country invaded Ukraine on Feb. 24. At the time Musk sent the messages, the conflict was raging and observers feared that Putin was going to ramp up his Ukraine effort.
On Sept. 6 in court, Bill Savitt, an attorney for Twitter, read from a Musk message: “Let’s slow down just a few days. Putin’s speech tomorrow is really important. It won’t make sense to buy Twitter if we’re heading into World War III.”
The day following Musk’s messages, Putin spoke on the 77th anniversary of the Allied victory over Nazi Germany. During that speech, the Russian leader defended his decision to invade Ukraine, saying it was the “only right decision”. He claimed without evidence that the West was “preparing for invasion of Russia.”
For Twitter’s lawyers, Musk’s messages prove that the tycoon’s decision to end the transaction stemmed from not the fake-accounts matter but rather to his concern about his financial situation. They also say the decline in financial markets is another reason the billionaire abandoned his takeover.
During the Sept. 6 hearing Musk’s attorneys rejected that characterization and added that the plaintiff still hasn’t provided the evidence to support its theory: “Their theory about what really happened isn’t what really happened,” a lawyer for Musk said at the hearing.
TheStreet has contacted Alex Spiro of Quinn Emanuel Urquhart & Sullivan, one of the lawyers defending Musk, for elaboration.
Musk’s private messages were obtained by Twitter as part of the discovery process in the litigation.
The Tesla (TSLA) CEO is coming off mixed rulings in court in what has been a fierce legal battle.
He was granted a request to add a whistleblower’s allegations in support of his effort to walk away from the takeover of the social-media group. But Chancellor McCormick denied an attempt to delay the mid-October trial. You can read her decision here.
Musk’s fortune, which is based largely on his Tesla shares, is estimated at $251 billion as of Sept. 7, according to Bloomberg Billionaires Index.