Elon Musk vs Twitter: Tech Giants at War!
Was it a “meme” deal intended to expose the inner workings of Twitter, an empty castle built on bots, or did he get cold feet?
Get your popcorn ready
On Saturday, July 9th, 2022, we were greeted with breaking news on the inter-web that Elon Musk was pulling out of the Twitter TWTR -0.11%↓ deal. The reaction to the news has been a mixed bag.
Immediately, the Twitter board threatened to sue. Here is the chairman of the board, Bret Taylor, who threatened to pursue legal action to enforce the merger.
Let’s Rewind How It Started
On April 14, 2022, Elon Musk the CEO and co-founder of Tesla and SpaceX shook the world when he offered to purchase the social media company Twitter, for $43 billion.
Speaking at a TED conference hours after making the offer, Elon said he isn’t sure he will actually be able to acquire Twitter, adding that his offer isn’t about the economics or making money. Asked if he had funding secured, Mr. Musk said, “I have sufficient assets.”
Elon went on to say that he offered to buy the rest of Twitter Inc. because the social media platform has become the “de facto town square.”
It’s “very important for there to be an inclusive arena for free speech,” Mr. Musk said at a TED conference in Vancouver.
Twitter Board Reaction
Twitter rushed on to prevent Elon Musk from significantly increasing his stake the day after he made a $43 billion unsolicited takeover bid for the social-media company.
The company adopted a now-famous “poison pill” that would make it difficult for him to increase his stake beyond 15%. He already owned a more than 9% stake that he had revealed earlier before the famous bid, thus making him its largest shareholder by then.
Twitter had then invited Musk to join their board of directors, which Musk at first accepted before subsequently declining.
The poison Pill would also allow other existing shareholders to buy stocks at a substantial discount in order to dilute the holdings of new investors and prevent the sale which saw Vanguard buying more stock, hence becoming the majority shareholder.
The offer to buy Twitter news was greeted with jubilation from right to center-leaning conservatives, as Musk promised to make Twitter a Free Speech Utopia. And it was a nightmare for the far left.
On April 25, Twitter’s board of directors unanimously accepted Musk’s buyout offer of $44 billion, with the company set to be privatized.
On April 26, Musk encouraged everyone to stay on Twitter even after the purchase.
The Pull-out and the Lawsuit
Twitter fake accounts bot problem
Twitter accuses Musk
“Refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests. Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, Musk apparently believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.”
The Lawsuit is “to compel Musk to fulfill his legal obligations, and to compel consummation of the merger upon satisfaction of the few outstanding conditions.”
New Revelations: The Whistleblower
A whistleblower complaint has alleged that Twitter misled users and authorities about its security against hackers and spam accounts. The whistleblower is Peiter Zatko, Twitter’s ex-head of security.
He raised questions about severe shortcomings in Twitter’s handling of users’ personal data, including running out-of-date software, and that the executives had withheld information about breaches and lack of protections for user data.
In 84 pages of disclosures and supporting documents, Zatko accuses Twitter’s top executives of violating the Federal Trade Commission Act and Securities and Exchange Commission regulations by misleading users, investors, and board members about critical data security and privacy issues. These vulnerabilities led to frequent serious security breaches, exploitation by bad actors, and infiltration by foreign governments.
A Twitter spokesperson said the company had not seen Zatko’s allegations in full, but rejected a description of his main allegations.
“Mr. Zatko was fired from his senior executive role at Twitter for poor performance and ineffective leadership over six months ago. While we haven’t had access to the specific allegations being referenced, what we’ve seen so far is a narrative about our privacy and data security practices that is riddled with inconsistencies and inaccuracies, and lacks important context. Mr. Zatko’s allegations and opportunistic timing appear designed to capture attention and inflict harm on Twitter, its customers, and its shareholders. Security and privacy have long been company-wide priorities at Twitter and we still have a lot of work ahead of us.”
Twitter shares have continued to fall since the whistleblower revelations. Twitter’s response to Zatko’s revelations screams damage control written all over it. Since Mr. Zatko shows that he began documenting Twitter’s alleged wrongdoings months before Musk publicly announced his desire to buy the company.
Elon Musk Cites Whistleblower in Effort to stop the Twitter Deal
In a filing on Tuesday, August 23, 2022, lawyers on behalf of Musk said the allegations by Zatko, including “egregious deficiencies” in the platform’s defenses against hackers and privacy issues, meant that Twitter had breached the conditions in the merger agreement.
Lawyers for both Musk and Twitter have subpoenaed Zatko.
One might find it way too convenient the timing of the coming forward of the whistleblower. Is he part of Musk’s master plan to pull out of the deal? It’s all just speculation at the moment. We have to wait a bit longer for answers on how the lawsuit turns out.
The trial of the century over whether Elon Musk must go through with his initial agreement to buy Twitter is set to start on Oct. 17 in Delaware. Chancellor Kathaleen S. McCormick of the Delaware Chancery Court judge ruled that Elon Musk may amend a countersuit vs Twitter to include a whistleblower complaint, but denied his request for a trial extension, keeping an Oct. 17 start date. Musk had requested the trial be pushed to Feb. 13, 2023.
Latest Update:
It is widely reported Elon Musk is going to finally finalize the Twitter acquisition merger deal on Friday, October 28th, 2022.
