Breaking down Elon Musk’s latest offer to buy Twitter

Elon Musk has changed his mind again: he does want to buy Twitter, actually. This, after months of drama! He signaled his intent in a new filing with the Securities and Exchange Commission — but there’s a catch: Twitter has to drop its lawsuit.

We understand if you have questions about the whole situation; honestly, we do too. So we talked to some legal experts in hopes that would give us at least a fighting chance at providing some answers. Let’s get into it.

Sigh. This all started after Musk announced that he purchased a 9.2 percent stake in Twitter in April 2022. Twitter promptly offered Musk a seat on the company’s board of directors, an offer Musk initially accepted before changing his mind about a week later.

The reason for the change of heart? Musk wouldn’t be able to acquire a stake larger than 14.9 percent if he were to stay on the board. He also hinted that he would’ve had to give up his pastime of tweeting about how Twitter sucks. So, Musk’s brilliant solution to this conundrum was to buy all of Twitter in a deal valued at $44 billion.

Things went downhill from there. Musk soon accused Twitter of not providing him with adequate information about the number of spam bots on the platform, then claimed this was enough reason for him to back out of the deal altogether. Twitter (understandably) didn’t take too kindly to that and struck back at Musk with a lawsuit demanding that he close the deal.

Twitter and Musk were set to duke it out in court on October 17th, but, in typical Musk fashion, on Tuesday, he decided he would go through with his deal to buy Twitter for $54.20 a share after all — if the judge overseeing the lawsuit adjourned the case.

We can’t get inside Musk’s brain to find out for sure (and frankly, we’re not sure we’d want to), but there are a few things that might’ve made him change his mind.

First of all, the pretrial discovery process revealed some embarrassing text messages that showed how the deal imploded and how Elon went from being amped about investing in Twitter to saying that the only way to fix it was to take it over.

Musk likely knows things could get messy at trial. As Eric Talley, a law professor at Columbia University, tells The Verge, Musk was likely facing “a very unpleasant deposition” that could potentially dredge up “extremely inconsistent statements” that could spell even more legal issues. It also doesn’t help that Musk’s case against Twitter essentially relies on publicizing bad things about the very company he could end up acquiring.

Honestly… who knows? Musk has reaffirmed his offer in a filing with the SEC, and Twitter has stated that it intends to “close the transaction at $54.20 per share.” That’s more or less been its stance ever since Elon first said he wanted out of the deal, so it’s not necessarily an indication that it’s agreeing to the new offer.

Ann Lipton, a professor of business law at Tulane University, told The Verge that “It’s hard to tell how much of a commitment” Musk’s filing is until his court hearing with Twitter. “But it would be weird for him to publicly file with the SEC if he’s not genuinely interested in settling — that would be some serious securities fraud otherwise,” she said. (Securities fraud? Musk? I couldn’t imagine.)

The straightforward answer is Elon Musk, but there’s some nuance here. From a legal standpoint, all of Twitter’s publicly traded stock is being purchased by a holding company, which is “wholly owned by” Musk, according to the SEC filing. (There’s also several other holding companies involved in the deal, but they’ll mostly end up folded into Twitter.)

While Musk won’t have to answer to public shareholders like Twitter has historically had to, there are outside firms and people with billions invested into or tied up with this deal, including Binance, Oracle founder Larry Ellison, Saudi Arabia’s Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud, and Andreessen Horowitz. You can see the full list, including how much each entity has invested, in this report from The Wall Street Journal. Elon’s promised them a return on their investment, and The Washington Post suggests that they may also want to have some control over the platform itself.

There’s also the secondary question of who will actually run Twitter day-to-day. Earlier this year, reports surfaced that Musk would temporarily be in charge of the company after the acquisition, displacing current CEO Parag Agrawal. While Musk hasn’t publicly said what will happen, it seems unlikely that he’ll let Agrawal keep his position; the two have been publicly fighting for months, and Musk’s recently-publicized texts show that he was frustrated with Twitter’s leadership.

As for whether Musk still intends to act as the company’s CEO, or who he intends to take his place, that’s really anyone’s guess.

It’s a little up in the air right now. Talley said that the lawsuit “is not going to stop dead in its tracks, it will continue,” and that he’d expect the judge to signal whether she’ll allow anything to be frozen in time. “The machinery is still geared to trial on October 17th,” he said, adding that things like depositions will still continue until there’s actually a deal.

Well, yes, but Twitter would have to agree to that — and Tilley doesn’t think it would unless the deal is definitively done by October 17th, because it doesn’t want to be like Charlie Brown kicking the football. “I very much doubt that they would agree simply to stay everything. Nor, for that matter, would the Chancellor, who has structured her schedule around the trial date that was set months ago,” he said.

He did note that “one or two items may get delayed a few days,” including Musk’s deposition, but that “team Twitter pretty much has to continue to plan as if this trial is going to happen.” He added that the looming trial would also act as a stick to keep Musk from delaying his settlement efforts.

The Wall Street Journal reports that the judge has asked Musk and Twitter to come up with a plan that would put a halt to the trial by the end of the day, but we’ll just have to see if anything comes of that.

At this point, it’s completely unclear how long it’ll be before the deal actually closes. However, there is an important deadline in April, 2023, which is when Musk’s financing agreements expire. If he doesn’t close the deal or re-up those agreements by then, it’s possible the whole thing could fall through — potentially leaving him on the hook for the billion-dollar breakup fee. As for what that’d mean for Twitter… well, it’d be a billion dollars richer, which is nice, but it’d also have to remain a public company and figure out how to move forward after a year of chaos and having its name dragged through the mud.

As for the other things that could trip the deal up, given who we’re dealing with it feels like anything could happen; Musk could incur the wrath of the SEC, Twitter could accidentally admit to something terrible in court, aliens could invade because SpaceX was being real loud with its rocket launches. What we’re trying to say is that this deal isn’t over until it’s over.

With additional reporting by Elizabeth Lopatto