Elon Musk Says His Takeover of Twitter Is ‘On Maintain.’

Already probably the most uncommon company takeover makes an attempt in trendy enterprise, Elon Musk’s $44 billion bid to purchase Twitter received a bit of weirder on Friday.

First, in a pre-dawn tweet, Mr. Musk stated the deal was on maintain. He stated he wished extra particulars concerning the quantity of spam and faux accounts on the platform.

Then, about two hours later, Mr. Musk tweeted once more. He was “nonetheless dedicated” to the acquisition, he stated, with out offering any extra particulars.

The seemingly contradictory messages left many questioning whether or not Mr. Musk was getting chilly ft, making an attempt to drive down the acquisition worth or in search of a little bit of consideration. Maybe it was some mixture of the three. Twitter’s inventory yo-yoed in response to his posts.

As with many issues involving Mr. Musk, it was laborious to know his considering. He didn't instantly reply to a request for remark.

The bulletins marked the most recent chapter in an unfolding company saga that has raised questions on free speech on-line and the ramifications of placing the world’s richest particular person in command of probably the most influential social media platforms. Mr. Musk has pledged to loosen the corporate’s content material moderation insurance policies. On Tuesday, he stated he would elevate a ban on former President Donald J. Trump.

Whereas most acquisitions of this scale are dealt with in a sure choreographed method, Mr. Musk has opted for a extra improvisational method. He performed restricted due diligence on the deal earlier than charging forward, and stated throughout an interview at a convention in April that he didn't care concerning the particulars of Twitter’s funds.

On Friday, Mr. Musk demonstrated how his whims can affect the deal making.

In his preliminary tweet, Mr. Musk made reference to a Could 2 regulatory submitting by Twitter that included an estimate that fewer than 5 p.c of Twitter’s customers have been spam and faux accounts. He had beforehand stated that ridding the platform of faux accounts, bots and spam can be certainly one of his prime priorities after taking on.

Twitter has few restrictions on signing up for an account, and the corporate has lengthy struggled with spam and bots. However it has been troublesome to place an actual determine on the dimensions of the issue. Within the Could 2 regulatory submitting, Twitter cautioned that it had utilized “vital judgment” in making the calculation concerning the variety of bots, and that its “estimation of false or spam accounts might not precisely signify the precise quantity,” language just like that utilized in previous filings from the corporate.

Twitter had disclosed figures about pretend accounts earlier than Mr. Musk made his bid, leaving some to view his feedback as a tactic to drive down the worth of the acquisition or a pretext for ultimately backing out altogether. Twitter’s inventory was buying and selling at about $41 per share on Friday, in comparison with the $54.20 per share worth that Mr. Musk agreed to pay final month.

Twitter didn't reply to a request for remark.

Backing out of the deal might get messy. Mr. Musk’s cope with Twitter features a $1 billion break up charge if he have been to step away. However the associated fee to Mr. Musk might be a lot larger ought to he break the deal. The contract has a “particular efficiency clause” that might power Mr. Musk to pay for Twitter if the debt financing he has corralled for the deal stays intact.

“Particular efficiency is an order from the court docket saying, Elon Musk, I do know you don’t need to, however you’ve dedicated to pay for this factor; you’ve received to pay for it,” stated Brian Quinn, an affiliate professor at Boston School Legislation College who focuses on company mergers.

Mr. Musk might additionally attempt to kill — or renegotiate — the deal by arguing there was a “materials opposed occasion.” LVMH Moët Hennessy Louis Vuitton tried this method with its $16 billion acquisition of the jeweler Tiffany’s, citing the results of the coronavirus pandemic. Tiffany’s then sued LVMH, which finally purchased the jeweler for a cheaper price.

However the bar for such claims is excessive, attorneys say. And since Mr. Musk put collectively his bid at rapid-fire velocity, and with out wanting deeply into Twitter’s inside information earlier than signing a deal, he might not have a powerful case. Twitter might argue that he might have made himself extra conscious of sure challenges dealing with the corporate and brought extra time to look into its enterprise.

Mr. Musk has pledged to make use of his private fortune to finance the deal for Twitter, a plan that has been affected by a current plunge in inventory costs, together with Tesla’s. Tesla’s inventory has fallen almost 30 p.c prior to now month. Mr. Musk is each promoting Tesla shares and placing them up as collateral for private loans to lift money.

If a deal have been to be accomplished, enterprise challenges at Twitter might power Mr. Musk to attract additional on his inventory within the electrical carmaker to plug potential monetary holes. And any drawback at Tesla that brought about its inventory to fall far sufficient might set off clauses in Mr. Musk’s private loans that will require him so as to add extra collateral, limiting his capacity to put money into Twitter.

Tesla’s inventory rose on Friday after Mr. Musk’s feedback.

The fluctuations in shares of Twitter and Tesla that adopted Mr. Musk’s tweets might draw scrutiny. The Securities and Alternate Fee charged Mr. Musk with securities fraud in 2018 after he falsely tweeted that he had secured funding to take Tesla personal, sending the automaker’s shares up 6 p.c. Mr. Musk and Tesla paid a $40 million penalty for the tweet. A shareholder lawsuit towards Mr. Musk over the tweet is ongoing.

“If I have been his lawyer, I'd be spending the morning scrambling to determine what the implication of this all is below the federal safety legislation,” stated Marc Leaf, associate with Faegre Drinker and a former lawyer with the Securities and Alternate Fee.

Mr. Leaf stated Mr. Musk ought to be involved about how securities regulators might react to postings on Twitter which have direct ramifications on the deal to purchase the corporate. He additionally stated it was unclear if Mr. Musk’s postings on Twitter would require an up to date submitting with regulators about his plans to take the social media firm personal, since it's thought-about materials info to buyers. He stated Mr. Musk’s attorneys have been in all probability discussing whether or not to do this in some unspecified time in the future in the present day.

Alex Spiro, a regulatory lawyer for Mr. Musk, didn't return requests for remark.

Mr. Musk’s tweet on Friday was not the primary time he has taken jabs at Twitter’s enterprise. He has raised questions on why celebrities and high-profile people don’t use the platform extra. He focused particular person firm executives who oversee the corporate’s insurance policies for taking down dangerous and illicit content material.

The fallout of Mr. Musk’s bid has created uncertainty inside Twitter, an organization already struggling so as to add customers and generate extra income. On Thursday, Twitter’s chief government, Parag Agrawal, fired two prime executives, halted new hiring and pledged to slash spending.

Kate Conger and Matthew Goldstein contributed reporting.