Why Elon Musk’s Twitter Flip-Flop May Be The Right Move

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(Photo by Diego Donamaria/Getty Images for SXSW)

Look, if you were the world’s richest man, you would probably have your own perspective on a lot of things too. Elon Musk has proven this concept again and again.

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The latest development in Musk’s formerly scuttled attempt to buy social media giant Twitter shows that just about anyone can take good legal advice. The billionaire has indicated that he is now willing to acquire Twitter at his original offer price.

To catch up anyone late to the party on this, in the first half of 2022, Elon Musk suggested buying Twitter at about $44 billion. Twitter itself was initially very opposed to this, and the company adopted a shareholder rights “poison pill” to prevent the acquisition. Then Twitter reversed course and warmed to the deal — while, in the meantime, Musk got cold feet. The billionaire and world’s richest man (depending on stock prices) voiced serious concerns with the number of bots and fake accounts on Twitter, and with the company’s level of disclosure (or lack thereof).

Cue Twitter attempting to enforce the agreement for Musk to purchase the company. In a monthslong dance, Musk’s lawyers voiced reasons why the billionaire shouldn’t have to purchase the company even as Twitter lawyers advanced plenty of arguments in favor of the forced acquisition.

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Some recent reporting indicated that Musk was in talks with Twitter to cut the original asking price of approximately $44 billion. It ultimately didn’t happen though, and in a stunning reversal, Musk’s lawyers just sent a two-sentence letter to Twitter with a proposal to move forward on the original terms.

Now, Elon Musk never had the strongest case to back out of the Twitter acquisition deal. Recognizing this, and relying on the advice of competent legal counsel, is the mark of a savvy corporate client. Still, it’s an unusual circumstance that leads any individual or entity to backtrack so completely on a legal challenge such as to give the other side essentially everything they are asking for.

So, what’s going on here? The honest answer is that the case defies traditional legal analysis. Elon Musk is, at various times depending on stock prices pursuant to a full-throated journalistic caveat, the world’s richest man. He can kind of do what he wants.

But in this case Musk came up against an opponent who called his bluff. There were talks in recent weeks about a potential discount of up to 10 percent for Musk’s acquisition of Twitter. Yet even these did not move forward. Twitter’s market cap at midweek was $39.2 billion, just shy of the approximately $44 billion purchase price originally proposed by Musk.

A traditional investor might have suggested a more fundamental-based approach to coming at a purchase price for Twitter. At least the latter portion of Musk’s $54.20 per share bid for Twitter seemed as much based on his obsession with “420” related marijuana puns as on any realistic fair market valuation for the company.

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Even so, not many people have come out ahead in betting against Elon Musk. Moving forward with the Twitter purchase at the original price might simply represent good business judgment given the posture of the pending legal case. There’s reportedly no solid deal to end litigation yet — although it’s only a matter of time with Musk publicly caving to the original purchase price.

In the past, I have certainly opined that administering Twitter was beneath Elon Musk’s many talents. Perhaps it is just what he needs though. Following a few increasingly detached public statements lately, it seems clear that Musk needs something to reconnect him to the average American perspective.

And, based on past experience, Elon Musk just might turn Twitter around from the societal dumpster fire it has become, daunting though that may seem. It can’t be harder than vertical rocket landings or a profitable electric car company.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at [email protected].

Topics

ATL Finance, Elon Musk, Finance, Finance Docket, Jonathan Wolf, Twitter