“It’s one of the craziest economic deals I’ve ever seen. From the beginning it looks like a circus show, and it is ending like a circus,” reacted analyst Dan Ives of Wedbush.
Elon Musk sent a letter to Twitter on Friday, announcing that he was ending the agreement made in April to buy the platform for $54.20 per share, or $44 billion in total.
But this kind of contract is “designed to prevent buyers from panicking and deciding to withdraw”, recalls Ann Lipton, professor of law at Tulane University.
The boss of Tesla and SpaceX presents several arguments: the board of directors (CA) would have minimized the number of inauthentic accounts active on the platform, and would not have provided him with all the information necessary to correctly assess the spam problem.
Elon Musk’s lawyers also refer to recent layoffs of Twitter employees and the recruitment freeze, contrary to the company’s obligation to continue to operate normally. These are not sufficient reasons, believes the specialist in business law.
“Musk is looking for the little beast. But for “false declarations”, for example, it is not just necessary to prove that they are false, but also that they drastically call into question the economic fundamentals of the company”, she explains. “From a legal standpoint, it seems clear that Musk is wrong,” she adds.
Everything to lose
There remains the possibility that the multi-billionaire is still looking to renegotiate the price lower. This tactic had been used successfully by LVMH: two years ago, the global luxury giant broke off the engagement with Tiffany before obtaining a discount.
But experts do not see what price could put Elon Musk and Twitter in agreement, while the action of the platform has lost more than a quarter of its value since the end of April. “Both sides have a lot to lose,” says Ann Lipton.
If Twitter wins in court, the whimsical businessman will have to pay a few billion dollars in damages. At worst, he could be forced to honor his commitment and buy the Californian group at the exorbitant starting price, while his fortune has shrunk by a few tens of billions of dollars in recent months.
But this victory for shareholders would leave the company and the iconic social network in the hands of Elon Musk. However, his vision is not at all aligned with that of many employees, users and advertisers, on whom the economic model of this service depends.
“Twitter is in worse shape than it was six months ago, but in the long run it’s still better that it doesn’t belong to Musk,” said Carolina Milanesi.
“It would be like giving a toy to a capricious child who doesn’t want it anymore and doesn’t know what to do with it,” continues the Creative Strategies analyst. The blue bird would “slowly and painfully fade away”.
The trial is expected to last months, especially since Elon Musk will drag things out, according to Ann Lipton. The libertarian entrepreneur, followed by more than 100 million people on the platform, “will seek to humiliate them, and it will be demoralizing for the employees,” she says.
He has already harassed the service with very critical tweets, mockery and outlandish suggestions, encouraged by his fans. For Twitter, “it’s going to be a battle on all fronts, to keep their engineers, not to lose ground, to preserve their brand image and deal with questions from investors”, elaborates Dan Ives.
Unlike its neighbors in Silicon Valley, the tweeting network never became a money-making machine capable of turning user attention into astronomical ad revenue. “In recent months, Twitter has not been able to focus on its business. They’re going to end up with the same problems they had before Musk,” says Debra Williamson of eMarketer.