08 June 2022

Elon Musk before the purchase of Twitter: legal difficulties

Since the beginning of 2022, the billionaire and CEO of Tesla and SpaceX, Elon Musk, has been making efforts to buy the Twitter company, a social network that has faced many difficulties and malfunctions at the legal plane since its inception.


If such a purchase was to take place, having the richest man in the world at the helm of the Twitter platform, one of the most influential on the planet, would also mean taking the lead in political affairs, the media and the technology industry. Well, Elon Musk has already indicated several times his intention to fall upon freedom of expression, in accordance with the legal framework of each market in which Twitter operates. As well as curiously, reversing the veto that Twitter imposed on Donald Trump.


However, this new Musk's target is facing endless problems. In the first place, as the billionaire was skeptical from the beginning, the financing of the purchase began to be questioned, as the shares of Tesla and its technological sector began to fall. There was speculation that Musk intended to renegotiate the deal by temporarily pausing it to assess spam and fake accounts.


Chronologically, the CEO of Tesla began increasing his shares in the platform to 5% in March, the month in which he also tweeted voraciously about the Twitter algorithm, proposing users through a poll whether it should be an open source and if they considered it favors the freedom of speech for a proper functioning of democracy.


Afterwards, Musk met with former Twitter CEO Jack Dorsey, with whom he is said to have a bromance on and off the platform, to discuss the future of social media as the tech founders they are.


In the month of April, the directorate of the Twitter company valued ​​with their lawyers the possibility of including the billionaire on the board of directors of the company. This would condition his public statements without the prior consent of the board, of course limiting his freedom of expression. Meanwhile Musk has already become Twitter's largest individual shareholder with 9%, shooting up the company's market stock by 20%.


At first it seemed that he was going to accept such a proposal: "Through the conversations with Elon in recent weeks, it was clear to us that he would bring great value to our Board" says Parag Agrawal, current CEO of the company. He had to committ, on the other hand, not to acquire more than 15% of shares. Ultimately, Musk decided not to join the board, continued to freely tweet his ideas, and made his first buyout offer for $41.4 billion.


Important words from the businessman: "I invested in Twitter because I believe in its potential to be the platform for freedom of expression throughout the world, and I believe that freedom of speech is an imperative of society for democracy to work. However, ever since I made my investment, I realized that the company will not thrive or serve this social imperative in its current form. Twitter needs to become a private company", "Twitter has extraordinary potential. I will unlock it."


Since then, the Twitter board began to put obstacles in the way of shareholders, establishing a rights plan of limited duration, making it more difficult for Musk to acquire the entire company. The billionaire started to seek financing, getting rid of billions of shares of Tesla and at the end of April it seemed that Twitter agreed to be sold for 44 billion dollars.


Musk earlier presented investors with a plan to boost Twitter's subscription revenue and build a payments business, while reducing the company's reliance on ad sales; which would increase the company's annual income by more than 500% until 2028.


In mid-May, Musk tweeted that the deal was to be temporarily on hold, justifying a Reuters report on the amount of spam and fake accounts of the platform: "The Twitter deal is temporarily on hold pending details to support the calculation that spam/fake accounts effectively represent less than 5% of users," was the tweet that led to a 10% drop in Twitter's stock price.


But the CEO of Tesla still harbored intentions to continue with the purchase agreement… Until more problems with the non-disclosure agreement came, when the company's legal team accused him of revealing that the size of the bots (fake accounts) verification sample was 100.


The issue of spam bots has become the focus of the purchase agreement; Mr. Musk, who indeed regards the Twitter platform as vital to the future of civilization, argues that probably the number of fake accounts actually amounts to 90%. He has promised to defeat them or die trying.


Now Elon Musk is demanding proof of the number of accounts corresponding to spam, or the negotiation will not be fulfilled, since according to him it is a substantial breach of the obligations of the merger agreement. In addition to the company's shares being much lower than the billionaire's bid, some investors believe he is looking to negotiate the amount offered, as Twitter appears to be concerned about what he might uncover by revealing such spam data.

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