People said that Donald Trump should be taken seriously, but not literally. Elon Musk now appears to be copying the former US president’s playbook. When in April the world’s richest man offered to buy Twitter for $44 billion (€43.8 billion), it seems he meant it seriously, but not literally. Last week, Musk said he was pulling out of the deal, accusing the social media company of providing “false and misleading” information.
Unfortunately for Musk, the US legal system is in the business of taking things literally.
On Tuesday, Twitter’s board sued Musk to force him to honour his legally binding agreement to buy the company. Twitter asked the Delaware court of chancery to fast-track a trial for September.
“Musk apparently believes that he – unlike every other party subject to Delaware contract law – is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away,” Twitter fumed.
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The Delaware court will examine the case on its merits. But some lawyers suggest Musk’s defence is thin, if not laughable.
Musk waived his right to conduct due diligence when making his bid. He promised to “defeat spam bots or die trying”, before professing shock about how prevalent they were. And he objected to Twitter losing a few employees when he had previously favoured wider job cuts.
“I think we are finally going to see if Elon Musk is ‘above the law’,” said John Coffee of Columbia Law School. “I am confident that in the Delaware courts the answer is no.”
[ Twitter hires US law firm Wachtell to sue Elon Musk for ending €43bn takeoverOpens in new window ]
Such a controversy would surely kill the credibility of more conventional business leaders. But for the South African-born entrepreneur, the multibillion-dollar Twitter spat appears business as usual, just another crazy episode in the life of one of history’s most extraordinary entrepreneurs.
Last week, the news site Insider published court papers showing that Musk had fathered twins with a senior executive at Neuralink, his brain computer interface company, just weeks before he and his on-off pop star girlfriend Grimes had their second child. On Monday, a SpaceX booster rocket exploded during ground testing in Texas, denting the ambitions of Musk’s company to launch its Starship spacecraft.
And on Tuesday, Musk jumped into a social media fight with Trump after the former president called him just “another bullshit artist” for trying to walk away from his bid for Twitter. After Ashlee Vance, Musk’s biographer, tweeted about Trump’s further attack on the Tesla boss for relying on government subsidies to build his car company, Musk replied: “Lmaooo” (laughing my ass off, off, off, as the Urban Dictionary explains).
Musk’s wild defiance of convention and passionate embrace of risk strike even some of his fellow tech billionaires as reckless. “Tesla and SpaceX were completely insane ventures,” one said privately this week. “Elon seems to know more than the rest of us.”
What all this means for Musk’s bid for Twitter is anyone’s guess. It is hard to predict the outcome of a collision between a simple legal principle and a shape-shifting cultural phenomenon.
Twitter’s board is surely right to hold Musk to his word and fight for its shareholders’ interests. His offer represented a 38 per cent premium to Twitter’s share price before he started building a stake in the company. Moreover, the Securities and Exchange Commission does not take kindly to potential bidders creating a false market. The markets regulator has previously fined Musk $20 million (€19.8 million) and forced him to step down as Tesla chairman after misleading investors about his plans to take the car company private.
But Twitter’s board is hardly a model of effective governance or savvy practice. It has tolerated poor financial performance for years and mishandled the talks with Musk. Besides, Musk has shown himself far more adept at using Twitter’s own platform than any of the company’s directors. With 100 million followers, Musk has a powerful voice among Twitter’s users.
Whatever the strength of its legal case, it is hard to see how Twitter will outsmart Musk. Forcing him to buy a company he no longer wishes to own is not a good outcome for the business. Nor is prolonged uncertainty welcome for its employees.
[ Twitter workers brace for more ‘circus’ after Elon Musk torpedoes dealOpens in new window ]
More likely, the legal dispute will signal the renewal of back room haggling over terms and price. There has been a savage market correction in other tech stocks, including Tesla, since Musk launched his bid. In that sense, Twitter’s suit should perhaps be taken literally, but not seriously. – Copyright The Financial Times Limited 2022
The writer is founder of Sifted, a media company covering European start-ups
