The excitement Tesla investors expressed running up the company’s stock Friday after CEO Elon Musk announced he wanted out of the deal to buy Twitter apparently gave way to the nervousness of the lawsuit the social media platform filed against him.
Tesla stock closed Monday down 6.5% at $703.03.
Musk revealed Friday he was cancelling the $44 billion deal he initially agreed to, pending due diligence, because Twitter executives weren’t being forthright about the number of real users of the platform. Twitter officials claim fewer than 5% of accounts were spam bot, or fake, accounts. Musk contends the figure is much higher, closer to 20%, and that lowers the value of the social media company.
Many believed this would be how Musk would look to get out of completing the deal, since he claimed his two primary reasons were making the acquisition was to get rid of the bots and ensure free speech on the site, calling it America’s town square.
Legal show down
Musk has an out for issues like that, but if he fails to make his case, he’ll need to pony up $1 billion as a “breakup” fee. Twitter announced it plans to hold Musk to the terms of the deal, saying in a statement, “We are committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plan to pursue legal action to enforce the merger agreement.”
And pursue legal action it did, filing suit Delaware’s Chancery Court, which is known for dealing with big, complex corporate actions like this one. According to multiple media reports, the court uses merger and acquisition experts, called chancellors, to hear the cases. This works against Musk and his team as a “regular” court might more easily swayed by Musk and his personality.
However, there is a major upside to going to court: Twitter could potentially be forced to reveal the information Musk is asking for, proving him right — or wrong. He certainly made it seem like this was a possibility in a tweet he posted midday Monday.
Easy out
Musk, currently the world’s richest man, believes he should be let out of the deal without being forced to pay the $1 billion fee because Twitter refuses to give him more details user information about its accounts — information, he contends, would prove he’s right about the number of fake accounts.
He also claims that Twitter lied in its 2022 Securities and Exchange Commission filings about the number of “real” accounts it has. Additionally, he says the inaccuracies lower the value of the company and it will or could have a “material adverse effect” on the company down the road.
Still distracted
Many loyal Tesla investors lament his lack of focus on the EV maker alone. Not only does oversee Tesla on a day-to-day basis, but he runs other companies too, such as SpaceX and The Boring Co. They view those as distractions that slow the progress the EV maker could be enjoying.
One area they point to is lack of diversity in the company’s line-up. After starting with the Model S more than a decade ago and expanding to four vehicles (Model S, X, 3 and Y), none of them have received appreciable styling or design updates.
Other vehicles the company’s teased, such as a second-generation roadster, the Cyber Truck as well as the all-electric semi truck, are seemingly forever being delayed. Musk often offers practical reasons for their production delays, but some shareholders believe if he focused on Tesla, he would move them beyond those problems.
Musk Friday teased the company could make a robovan, giving Tesla buyers an option for a minivan. He called it a robovan, saying in a tweet, “Maybe Tesla should make a highly configurable Robovan for people & cargo?”
A common occurrence by Musk: he spitballs on Twitter and the faithful create buzz about the idea, but little happens beyond the suggestion.
