Musk's takeover of Twitter fell apart last week, but the collapse has been coming for some time / Adobe Stock
Elon Musk is walking away from his purchase of Twitter. It is the latest move in a contentious relationship between the billionaire and the social network – one that has seen both parties lose face and market worth.
Twitter is reportedly hiring lawyers in order to force Musk to complete the transaction, but, regardless of how that plays out, there has been significant reputational damage to both the board of the social network and to Musk himself.
Here is a timeline of how the purchase was mooted, undertaken and, ultimately, fell apart. Though Musk had been a critic of Twitter for years, what is notable about the whole drama is how recently it all began.
Elon Musk tweets that he had the finances to take Tesla private at $420 a share. This decision will have wide-ranging implications, including an SEC lawsuit accusing Musk of defrauding investors and $20m in fines for both Tesla and Musk, who also gives up his role as Tesla chairman.
Most crucially, for this discussion, it also leads to Musk agreeing that a Tesla lawyer would be able to see in advance any tweets that the billionaire was planning about Tesla. As of June this year, Musk is still appealing those strictures.
Late in March, Musk makes good on threats he’d made – ironically on the social platform itself – to purchase a 9.2% stake in Twitter. This makes him the largest shareholder in the platform. It follows months of criticisms of Twitter, ranging from simple statements about a lack of edit functionality to more wide-ranging criticisms of the platform’s approach to monetization and moderation.
Statements include: “Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy. What should be done?”.
Critics immediately note that such swipes are likely rooted in Musk having been fined heavily for improper announcements on Twitter, as in 2018.
Twitter’s CEO, Parag Agwaral, says in a statement:
I’m excited to share that we’re appointing @elonmusk to our board! Through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our Board.
I’m excited to share that we’re appointing @elonmusk to our board! Through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our Board.— Parag Agrawal (@paraga) April 5, 2022
At the same time, Twitter extends an offer to Musk to join its board with the proviso that the billionaire not be able to purchase more than 14.9% of the company. This is seen as an attempt to prevent the unpredictable Musk from exerting an undue amount of influence at the company.
However, less than a week later Musk declined the opportunity, forcing Agwaral into an about-face in which he stated that the decision was “for the best”. Musk had told the board the same day that the appointment was to be made official, setting the tone for the chaos that would follow.
At the time social media consultant and industry analyst Matt Navarra said: “Right now, it’s incredibly hard to predict how much influence Elon Musk has – or will have – in the short and longer-term. He has declined to join the board, which leads many to suspect he is keeping his options open in regards to increasing the size of his shareholding in the future. This will be concerning for Twitter and anyone who sees Elon’s moves as a threat, rather than an opportunity.”
Musk tweets a simple, stark message about having made an offer for Twitter over the previous weekend. He also states that the $40bn offer was the best he would make and that if Twitter rejected it, it would be “utterly indefensible not to put this offer to a shareholder vote”.
I made an offer https://t.co/VvreuPMeLu
I made an offer https://t.co/VvreuPMeLu— Elon Musk (@elonmusk) April 14, 2022
In a letter to Twitter chair Bret Taylor, Musk states: “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe and I believe free speech is a societal imperative for a functioning democracy. However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.”
At this point, academics are already criticizing Musk’s lack of experience with moderation, noting that his claims to be a ‘free speech absolutist’ would clash with Twitter’s efforts to detoxify its feed to appeal to brands.
Twitter announces a number of new ad formats at this year’s Newfronts, ranging from new partnerships with sports brands to more video formats. The bulk of the announcements, however, are continuity updates designed to calm advertiser uncertainty about any changes Musk might make to the company.
This is undercut slightly as Musk announces a $7.14bn raft of new equity to support the takeover, in part from countries and individuals with at-best checkered approaches to free speech.
Elon Musk files new paperwork showing he’s got more than $7bn of equity financing to roll into his Twitter purchase… including Binance, some Qatari group and a Saudi billionairehttps://t.co/EmD3YZIQ0W pic.twitter.com/h1JtbzUNJp
Elon Musk files new paperwork showing he’s got more than $7bn of equity financing to roll into his Twitter purchase… including Binance, some Qatari group and a Saudi billionairehttps://t.co/EmD3YZIQ0W pic.twitter.com/h1JtbzUNJp— Mark Di Stefano (@MarkDiStef) May 5, 2022
This follows Musk selling Tesla shares worth over $8bn in late April to finance his takeover.
The trouble for Twitter and Musk really begins as the billionaire tweets that the deal is ‘on hold’ pending an investigation into the proportion of bots on the platform. Twitter has since 2014 been consistent in claiming its proportion of bots is no higher than 5% – roughly in line with Facebook. This was largely seen as a tactic for Musk to either drive the price of Twitter down to force a better deal or as a potential way to save face upon an exit.
It is immediately noted that Musk probably didn’t have a legal leg to stand on for putting a deal ‘on hold’ and that Twitter will likely suffer as a whole as a result. In the immediate aftermath of Musk’s unilateral announcement, Twitter’s share price falls sharply by around 25% compared with the $54.20 a share Musk agreed to pay in mid-April. As a result, on May 16 Twitter shareholders announce they are suing Musk for stock manipulation.
Since May, Musk has grown increasingly vocal about ‘bots’ on the platform, alleging that Twitter was downplaying the scale of the issue. In order to counter those assertions, it is reported that Twitter is offering musk access to its firehose API – effectively all data related to all concurrent users.
This is seen as a move to stave off the billionaire’s desire to walk away from the deal by providing Musk with a vast and unwieldy amount of data that would nevertheless bolster Twitter’s case if it came to a court case. And speaking of…
As had become inevitable, in early July Musk announces he would be walking away from Twitter following ‘multiple breaches’ of the agreement. The first and most visible complaint relates to the proportion of spam accounts, though it is noted that Musk would have a hard time proving this to a court.
The same day, Twitter revises its estimate of how many fake accounts it removes a day to 1m, which represents a doubling of Twitter chief executive officer Parag Agwaral’s statement in May that it was removing around 500,000. The company remains consistent in stating that only around 5% of its total user base is spam bots.
Since then, Twitter has announced its intentions to sue Musk – not for the $1bn it would get as part of the clause if Musk were to walk away, but to force the billionaire to complete the purchase.
For advertisers, marketers and users, the uncertainty is set to continue.