After months of “will they or won’t they,” Elon Musk is running up against a court-ordered deadline to deliver on his promise to buy Twitter Inc. for $44 billion.
(Bloomberg) — After months of “will they or won’t they,” Elon Musk is running up against a court-ordered deadline to deliver on his promise to buy Twitter Inc. for $44 billion.
The world’s richest person and the social media company he favors have until 5 p.m. Friday in Delaware to do the deal. If they don’t, Delaware Chancery Judge Kathaleen St. J. McCormick has said she will schedule a November trial to determine whether Twitter can force the impulsive billionaire to complete the buyout he mused on, proposed, shunned and finally put back on the table.
The day of reckoning, after a bitter round of suing and countersuing, will almost certainly end in a transaction. Musk assured bankers this week he would wrap the buyout on time. The banks providing $13 billion in debt financing are in the process of transferring the cash, while the New York Stock Exchange says action is pending to suspend trading of Twitter shares before Friday’s open. And Musk already seems to be settling in: He changed his profile descriptor on the platform to “Chief Twit,” showed up at Twitter’s San Francisco headquarters Wednesday and will be addressing staff on Friday.
He has even offered an olive branch, denying he plans to cut 75% of staff after taking the company private, and telling advertisers he doesn’t want Twitter to become a “free-for-all hellscape.”
Looking further down the road, Musk plans to take Twitter’s new holding company public within three to five years, according to people familiar with the matter.
Read More: Musk Tells Bankers He Plans to Close Twitter Deal on Friday
A deal would end one of the most contentious merger fights in US legal history and mark an uncertain new era for the social platform, which remains a vital forum but one Musk says he plans to revolutionize. If he and Twitter can’t close the deal by themselves, its fate will lie in the hands of McCormick, possibly with the same result: She has already made a series of rulings against Musk and is unlikely to appreciate having canceled the original trial date at his urging.
“It seems to me there’s a 99% chance this deal is going to close,” said Brian Quinn, a Boston College law professor who teaches merger-and-acquisition cases. “All the indications are Mr. Musk is resigned to his fate.”
As of right now, Musk looks to be headed full steam ahead toward closing the acquisition at the $54.20-per-share price he offered in April and Twitter says it is determined to get. At least some of the investors in the equity portion of the deal have already transferred funds, people with knowledge of the matter told Bloomberg.
Twitter shares closed up 1.1% at $53.35 after news of a chipper memo to staff Wednesday saying Musk would be “meeting with folks” at the office. That bump narrowed the gap between the share price and the takeover offer to less than $1. The stock, which has swung wildly as the dispute ground on, was about 40% below the offer price at one point in early July after Musk said he was walking away from the buyout. It has climbed ever closer to the offer this week after the Bloomberg report on the call with bankers.
But the deal’s short, tortured history and Musk’s whipsaw style have some experts on guard for a last, last, last minute surprise.
“Trying to predict what Elon Musk is going to do is a fool’s gambit,” said Jill Fisch, a University of Pennsylvania law professor who specializes in Delaware corporate disputes.
Musk raised his plan to take Twitter public in a few years in shareholder agreement letters to equity investors in the deal this week, the people with knowledge of the matter said, asking not to be identified because the information is private. The potential relisting timeline was included in an outline for a business plan for X Holdings, one of the entities Musk formed to buy Twitter, the people said. It also referred to the potential need for the company to raise more capital in the future.
A representative of Twitter declined to comment on the plans, while a representative for Musk didn’t immediately respond to a request for comment.
Read More: The Twitter Deal Pierces Elon Musk’s Reality Distortion Field
Twitter sued the 51-year-old Tesla Inc. chief executive officer in July after he said the deal was off. Musk argued that the company had misled him about the number of spam and bot accounts lurking in the 230 million-plus customer base, providing legal grounds for him to cancel the transaction. Twitter said the claim was a pretext for him to abandon the acquisition amid a decline in financial markets and a massive case of buyer’s remorse.
After the pretrial rulings against him and on the eve of a questioning session by Twitter’s lawyers, Musk agreed to consummate the buyout. His lawyers asked McCormick to delay an Oct. 17 trial so they could close.
That spared Musk not only the discomfort of the pretrial deposition but also the possible release on the public court docket of more of his private texts, not to mention whatever might come up at trial.
Read More: Musk Revives $44 Billion Twitter Bid, Aiming to Avoid Trial
If he blows up the deal at this point, Fisch said, Musk would be plunging himself into a world of hurt.
“The letter his side sent to the judge asking her to delay the trial has him pretty much locked in,” she said.
Shareholders and employees of Twitter are keenly awaiting a resolution. Morale at the company, and motivation to build new products, are declining amid uncertainty over how or when Musk will execute his vision of “creating X, the everything app” — which would basically be a US version of China’s WeChat — should he take over. Twitter remains in a hiring freeze, adjusting to a difficult economic market for its primary business, advertising, on top of all the chaos.
Meanwhile, Tesla’s stock has been under pressure from Musk’s bid for Twitter, as investors worry that taking on another big company would distract the Tesla CEO from his duties — and that Musk, who is also the electric car maker’s biggest shareholder, would have to sell more of his Tesla stock to finance the buyout.
If the acquisition somehow falls apart again, Musk would be going to trial in Wilmington against an adversary that Bloomberg Intelligence estimates has the legal advantage. Despite a whistleblower’s claims against Twitter, the company had a 70% chance of winning a court order requiring Musk to consummate the buyout at the original offered price, BI analyst Matthew Schettenhelm wrote in September.
Read More: Twitter, Musk Talks Warm Up as Buyout Closing Deadline Nears
Both Twitter and Tesla are incorporated in Delaware, corporate home to more than half of US public companies and more than 60% of Fortune 500 firms. Its Chancery Court judges, led by McCormick, are business law experts who hear cases without a jury, often on a fast-track basis.
A longtime Twitter devotee and super tweeter himself, with more than 100 million followers, Musk has been tweeting about his hopes and dreams for the platform. He said on an earnings call last week that he was “excited about the Twitter situation.” He described the company as an asset with “incredible potential” that has “sort of languished for a long time.”
He added that he was obviously overpaying for it.
The case is Twitter v. Musk, 22-0613, Delaware Chancery Court (Wilmington).
–With assistance from Ed Ludlow and Gillian Tan.
(Adds paragraph about Musk’s plans to take Twitter public in future, below the embedded tweet.)
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