Billionaire Elon Musk is proposing to go ahead with his original offer of $44bn to take Twitter Inc private, a securities filing showed on Tuesday, signalling an end to a legal battle that could have forced Musk to pay up.
An agreement would put the world’s richest person in charge of one of the most influential media platforms and end months of turbulent litigation that damaged Twitter’s brand and fed Musk’s reputation for erratic behaviour.
Musk, the chief executive of electric car maker Tesla Inc, will take over a company he originally committed to buying in April, but soon soured on.
Twitter shares jumped 12.7 percent to $47.93 before trading was halted for the second time, while Tesla shares rose by about 2.4 percent. Twitter ended up over 22 percent at $52.00.
Musk versus Twitter
The news comes ahead of a highly anticipated face-off between Musk and Twitter on October 17 in the Court of Chancery in Georgetown, Delaware, the US. In court, the social media company was set to seek an order directing Musk to close the deal for $44bn.
Musk sent Twitter a letter on Monday that said he intended to proceed with the deal on the original terms if the Delaware judge stayed the proceedings. A source familiar with Twitter’s team told Reuters news agency that at a court hearing on Tuesday morning the judge requested the two sides to report back in the evening.
It could not immediately be ascertained why Musk chose to abandon his fight. He was about to be deposed.
Twitter received Musk’s letter and intended to close the deal at the original $54.20 price, a spokesperson told Reuters.
Musk agreed in April to buy Twitter for $44bn and within weeks said the number of bot accounts was much higher than Twitter’s estimate of less than 5 percent of users. Bots are automated accounts, and their use can lead to overestimations of how many humans are on the service, which is important for advertising rates and the overall value of the service.
Musk, one of Twitter’s most prominent users, claimed in July that he could walk away from the deal because Twitter misled him about the number of real users and the security of user data.
Twitter’s legal team on September 27 said that documents obtained from two data scientists employed by Musk showed they estimated the number of fake accounts on the platform at 5.3 percent and 11 percent.
“None of these analyses so far as we can tell remotely supported what Mr. Musk told Twitter and told the world in the termination letter,” Twitter lawyer Bradley Wilson told the court.
The original deal was “a very seller-friendly agreement that would be very difficult to get out of”, said Adam Badawi, a law professor at UC Berkeley. Musk realised, he said, “in all likelihood it was going to result in forcing him to close at $54.20 a share.”
If deposed, Musk faced days of questioning on whether he handed over all the evidence to Twitter that he should have and when he became aware of his own side’s bot count data, said Eric Talley, a professor at Columbia Law School.
“He was about to get deposed and a lot of uncomfortable facts were going to come out.”
Twitter employees, caught by surprise in the middle of meetings on Tuesday, expressed disbelief in tweets.
“I am sitting on 2023 company wide strategy readouts and I guess we are going to collectively ignore what’s going on,” wrote Rumman Chowdhury, Twitter’s director of machine learning ethics, transparency and accountability.
A settlement between the two sides would revive fears among Twitter’s users about Musk’s plans for the platform, which has removed prominent politically conservative voices. Supporters of Donald Trump hope that Musk will reactivate the account of the former United States president, who was banned after the January 6, 2021 attack on the US Capitol by his supporters.
A renewed commitment to the deal would give Musk, already one of the world’s most prominent and outspoken entrepreneurs, a megaphone for his views. He has used Twitter to stir controversy, including on Monday when he floated a peace plan for the Ukraine-Russia war that drew swift condemnation from Ukraine’s President Volodymyr Zelenskyy.
Text messages that came to light during the litigation showed that Musk planned to battle spam by verifying accounts, wanted to shift Twitter away from advertising toward subscriptions and hoped to adopt services such as money transfers.
Bloomberg News was the first to report Musk was willing to pay the original price.
A settlement at the original price would also allow Musk to finance the transaction without any complications. If Musk and Twitter had renegotiated the price, it would have technically allowed committed backers to walk away.
Musk has already sold $15.4bn worth of Tesla shares since agreeing to buy Twitter. He has said he does not plan to sell any more of his stake in Tesla, but some analysts expect him to sell down his stake further to fund the Twitter deal.
Since Twitter has already received shareholder support for the sale to Musk, the deal could close quickly in the coming weeks if the two sides were to settle on the original terms. In June, Twitter said the waiting period for antitrust clearance had expired, indicating that the deal could go forward.