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Elon's Twitter Acquisition: The tale of a bird getting 'freed'

Elon Musk's acquisition of Twitter was initially announced on April 14, 2022, and completed on October 27, 2022.

Photo by Claudio Schwarz / Unsplash

Elon Musk's acquisition of Twitter was initially announced on April 14, 2022, and completed on October 27, 2022. Elon Musk, a business billionaire, started purchasing shares of Twitter, Inc., an American social media firm, in January 2022.

By April 2022, he had amassed a 9.1 percent ownership position in the business, making him the company's largest shareholder. Following that, Twitter extended an invitation to Musk to become a member of its board of directors, which Musk initially accepted but then turned down.

On April 14, he made an unsolicited bid to purchase the firm for $43 billion, to which Twitter replied with a "poison pill" strategy to oppose a hostile takeover of the company.

On April 25, the board of directors of Twitter overwhelmingly accepted Musk's offer to buy out the company for $44 billion, marking the beginning of taking Twitter private. Musk indicated that he intended to implement new features into the platform, make the platform's algorithms open-source, eliminate spambot accounts, and support free expression.

In July, Musk announced his intent to cancel the deal and asserted that Twitter had violated their deal by failing to clamp down on bot accounts.

He stated that this was why he decided to end the partnership. Shortly after that, the firm sued Musk in the Delaware Court of Chancery, and the trial is slated to begin during the week of October 17.

Musk changed his mind and announced that he would go forward with the acquisition a few weeks before the trial commenced.

The transaction was finalized on October 27, and Musk was appointed CEO and new owner of Twitter immediately afterward.

In addition, he dismissed several high-level executives, one of them being the previous CEO, Parag Agrawal. Since then, Musk has proposed several changes to Twitter, one of which is establishing a "content moderation committee" to manage issues about free speech.

The takeover has been met with a range of reactions, including support for Musk's proposed reforms and vision for the company, as well as condemnation based on concerns regarding the possibility of an increase in instances of propaganda, misdirection, abuse, and hateful speech on the platform.

Liberals, left-wingers, progressives, Democrats, and past and present Twitter employees have voiced worries about Musk's motives regarding the purchase, while conservative, right-wingers, libertarians, and Republicans have mostly supported the purchase.

Initial Developments

Elon Musk, a prominent businessman, sent out his first tweet through his private Twitter account in June 2010, and by April 2022, he had amassed more than 80 million followers.

January 31, 2022, marked the beginning of Musk's purchase of Twitter shares. Musk announced that he had purchased 9.2 percent of Twitter's shares for a total price of $2.64 billion on April 4. (1) This made him the largest shareholder in the firm.

Following the report's publication, Twitter shares increased by 27 percent. The following day, Twitter invited Musk to join the company's board, and Musk accepted.

This was something that had been proposed to the company by Twitter's Nominating and Corporate Governance Committee just three days prior, and members of the board had expressed worries about the possibility of "adverse implications on investor value."

Because of this position, Musk would have been unable to increase his ownership share in the firm beyond 14.9%, and he would have been restricted in his ability to make public statements regarding the business. (2) On the same day, Musk phoned Dorsey, and Dorsey rebuffed Musk's invitation for him to continue serving on the board of directors.

After posting several tweets dismissive of the business, Elon Musk rescinded his move to join the deck on April 11 before it was set to take effect. Musk told the board of his intent to submit a bid to privatize Twitter.

This occurred once Musk's nomination was set to take effect. On April 12, Twitter's board of directors gathered with solicitors and financial planners to discuss the implications of such an agreement and their available options.

Concurrently, on the same day, a company shareholder named Marc Bain Rasella filed a lawsuit against Musk, accusing him of manipulating the company's stock price and violating the rules of the Securities and Exchange Commission.

How it Began

On April 14, Elon Musk made an uninvited and quasi-bid to buy the firm and take it private for a total price of $43 billion, equivalent to $54.20 per share. (3)

The company's response to the bid was that the board would "seriously evaluate the proposal," even though it was labeled as a hostile takeover effort. In an interview with TED, Musk indicated that he wanted Twitter to become a "platform for free expression around the globe."

He called the right to free speech a "societal imperative for a functioning democracy," and he insisted that he did not make the offer to boost his riches. (4)

Critics assert that he did not demonstrate much interest in challenging censorship practices employed by governments around the world and instead focused his attention on the moderation rules of Twitter.

It is widely believed that the share price of $54.20 makes a reference to 420, which is a word used in the cannabis culture to allude to the act of consuming marijuana.

Twitter's board of directors decided to implement a "poison pill" strategy on April 15, which will remain in effect until April 14, 2023. This strategy will enable shareholders to purchase extra equity if Twitter is subject to a hostile takeover.

The top institutional shareholders of Twitter urged Twitter co-founder Jack Taylor on April 17 to "seriously consider" the offer.

On April 20, Musk asserted having secured financing for a potential tender offer to acquire the company.

The funding consisted of $6 billion in subordinated debt, $7 billion in senior secured bank loans, $6.25 billion in personal bank loans to Musk, which were secured by $62.5 billion worth of Musk's Tesla stock, and $20 billion in cash equity from Musk. (5)

The first proposal for Twitter to borrow $13 billion is equivalent to seven times the company's estimated operating cash flow for 2022. Some banks deemed that multiple too risky and decided to only engage in Musk's $12.5 billion margin loan.

According to some estimates, the annual interest and costs associated with the debt will cost Twitter close to one billion dollars.

The Court Drama

Musk said on July 8 that he wanted to end the planned acquisition. In a regulatory filing, he said that Twitter had been in "material breach" of many sections of the contract by not giving Musk the spambot account information he asked for and firing high-level employees.

In response, Taylor promised to sue Musk in the Delaware Court of Chancery so the buyout could go through.

The Twitter board's transaction committee would again be responsible for the lawsuit. After the news, Twitter's stock dropped by 7% and fell another 11% the next day. (6)

Twitter officially sued Musk on July 12 at the Delaware Court of Chancery. Twitter asked that the court hearing be kept from September 19 to September 22, before the deal was supposed to end on October 24.

This was turned down by Musk's lawyers, who asked for the trial to take place from February 13 to February 22, 2023. On July 19, Judge Kathaleen McCormick said that the trial would run for five days in October and Twitter asked for the court hearing to start on October 10.

In a letter to McCormick on July 26, Musk's lawyers said that Twitter was making it hard for them to start the discovery. They asked for an October 17 start date, and McCormick agreed three days later, giving them five days to do so.

Musk confronted Agrawal in a public discussion about Twitter's bot account holders in a tweet on August 6. He then asked his followers if they thought less than 5% of Twitter accounts were "fake/spam."

Musk managed to sell 7.92 million Tesla shareholdings with a value of $6.9 billion on August 10 as a backup plan in case he lost the lawsuit, even though he had said before that he wouldn't sell Tesla stock anymore. (7)

The following week, McCormick told Twitter to give Musk's team the files they had asked for from Beykpour and those from 22 other Twitter staff and 41 "custodians." Musk called Dorsey into court soon after.

Marc Andreessen, Ellison, David Sacks, and Joe Lonsdale are among the other businesspeople and investors who have been called in.

Faced with more force from Musk, Twitter said it would merge its anti-spam team with its healthcare team. The health team's job is to stop porn and child sexual abuse on the platform.

McCormick said that much of Musk's team's request for data about all of Twitter's users were "absurdly broad," but he did order the corporation to give him info from 9,000 records that had already been audited.

Musk sent a "termination letter" to the SEC on August 29. He used Zatko's claims as proof that Twitter broke their agreement. He then asked McCormick to put off the trial for a few weeks.

McCormick said no, so Musk's team forwarded Twitter the third letter of cessation. Zatko testified on September 13, while Twitter equity holders voted to support the purchase. Musk secretively offered to buy Twitter for $31 billion or $39.6 billion less than the original price. Both times, the company turned him down.

The Shift in Stance of Musk

Musk's legal team notified Twitter on October 3 that Musk had shifted his mind and chose to proceed with his proposed acquisition at the initially agreed amount of $54.20 per share, provided Twitter dropped its lawsuit. (8)

The reason for this turnaround was ascribed to Musk's team's worries that they were unlikely to prove that there was a materially unfavorable effect necessitating a contract termination.

The depositions of Musk and Agrawal were initially planned for October 6 and 10, respectively. [137] Musk indicated that his acquisition of Twitter was part of his plan to develop an "everything app" named X that will provide various services.

In response, McCormick requested that both parties offer a course of action. The Twitter stock price increased by 23 percent in response to Musk's remark.

On October 6, McCormick consented to Musk's petition to delay the trial until October 28 so Musk could complete his financial leverage for the purchase, adding that if the deal didn't close by then, the trial would've been postponed for November.

A week later, it was disclosed that the U.S. government investigated Musk for his involvement in the planned buyout.

Musk later claimed that he anticipated Twitter's long-term worth would reach $54.20 per share, a price he deemed excessive.

The Washington Post claimed on October 20 that Musk intended to lay off 75% of Twitter's employees and that Twitter executives were eager to sell the firm to Musk to reduce their projected salary and infrastructural cuts.

In an open letter, Twitter staff denounced Musk's actions and foresaw dire repercussions for the company's future.

The Post and Bloomberg News also reported that U.S. Biden administration officials were going to consider a federal security audit of Musk's buyout and other endeavors via the Committee on Foreign Investment (CFIUS), with the potential of President Joe Biden obstructing the buyout if necessary. White House officials have rejected these reports.

Both sides' bank executives and attorneys were scheduled to finish the acquisition paperwork by the end of the month on October 21, with the deal expected to finalize by then.

The banks financing the purchase will retain the $13 billion in debt rather than releasing it. In a video chat with the banks that helped Musk finance the purchase, he promised them he would meet the deadline.

On October 26, Musk visited Twitter's headquarters, posting a video of him lugging a kitchen sink through the lobby and updating his Twitter profile to "Chief Twit."

Musk also informed Twitter staff that although layoffs were possible, he did not intend to carry them on the scale reported earlier by the Post.

The next day, Musk addressed an open letter to advertisers dispelling their concerns that Twitter would turn into a "free-for-all hellscape" and emphasizing that his motivations for the acquisition were not based on money but rather a desire to build a "shared digital town square."

Then, he requested that Tesla developers meet with Twitter's product managers to evaluate the system's codebase, which will be locked until November 1.

"the bird is freed"

On October 27, in the afternoon, Musk and Twitter concluded the acquisition. Musk instantly became Twitter's new owner and promptly fired Agrawal, CFO Ned Segal, Gadde, and general counsel Sean Edgett, with security escorting the execs out of the company's headquarters.

Agrawal, Segal, and Gadde were scheduled to receive "golden parachute" payments of $38.7 million, $25.4 million, and $12.5 million, respectively.

However, Musk evaded the arrangement by claiming the execs were fired "for reason." (4)

Dorsey maintained his $1 billion shareholding in Twitter, but several other executives left the company empty-handed.

Musk assumed the role of chief executive officer, merged Twitter with X Holdings, and dissolved Twitter's boards of directors.

Musk refers to his role as CEO by the nickname "Chief Twit."

Per the New York Times, the firm's two key goals were to cut Twitter's headcount and revamp the mobile app.

Twitter shares suspended trading the following day in compliance with Musk's promise to take the firm private.

On November 8, the company's stock ticker will be removed from the New York Stock Exchange (5).