Here is a short and nonexhaustive list of things Elon Musk has done since agreeing in late April to buy Twitter: That week, he tweeted a meme with the face of Twitter’s top lawyer on it, accusing the social media company of “left-wing bias” and immediately unleashing a harassment campaign on the executive by the most annoying of Musk’s 86 million followers. He had already signed a contract that said he could not “disparage the Company or any of its Representatives.” A few weeks later, long after Musk had waived standard due-diligence rights to look under the hood of Twitter’s business in detail, he tweeted that the deal was “temporarily on hold,” which, as Bloomberg’s Matt Levine put it, “is not a thing.” Again, he already agreed to buy the thing and signed a contract that imposed a high standard for him to get out of it without paying a $1 billion breakup fee. Musk fretted that more of Twitter’s users are bots than the company had previously disclosed, even though Twitter has been quite clear that its bot estimates are just those—estimates. Experts have not identified a leg to stand on here. On Monday, in response to a thread about the same issue by Twitter’s CEO, Parag Agrawal, Musk simply tweeted an emoji of poop. I would be interested to see a judge rule on whether the poop emoji in Agrawal’s replies constitutes disparagement of a Twitter representative. Finally, early Tuesday morning, Musk tweeted that “This deal cannot move forward” unless Agrawal allays Musk’s concerns about bots.
Anyway, it is all odd behavior from a man concerning a $44 billion purchase he agreed to make less than a month ago. Musk’s brand of being himself in recent days has spawned a lot of theorizing about his endgame, including if there’s an endgame in the first place. I am just one blogger and don’t know the truth, but I do think it lies somewhere within three broad theories about what Musk is attempting. Please put any other plans temporarily on hold and join me.
Theory 1: Musk Wants to Buy Twitter at a Lower Price
This was a theory as recently as Monday afternoon. Now it might be better described as a thing that Musk is actively trying to do. Various media outlets, including the New York Times here, reported that Musk told a tech conference in Miami on Monday that it was “not out of the question” that he’d close the deal at a price lower than the $54.20 per share he agreed to pay in April.
Musk is fighting an uphill battle here, according to pretty much every mergers-and-acquisitions expert who’s been quoted in any media about the deal in recent days. The giant contract he struck up with Twitter has a nauseating amount of fine print, and one of the things crystalized in that fine print, barring some absolutely world-class lawyering by Musk’s camp, is that Musk cannot get out of the deal unless one of three things happens: 1) It comes to light that Twitter misled him about its business in a serious, serious way that materially changes Twitter’s future outlook. 2) The banks loaning Musk billions of dollars to close the deal suddenly yank back their money for some reason. Or 3) Musk pays that $1 billion fee. The first two seem unlikely, and Musk signed away his right to give Twitter the kind of fiscal colonoscopy that most polished investors would give to a company they were buying for $44 billion.
Nonetheless! The market appears to think Musk might really get a lower price, or at least that it is in the realm of the reasonable. When Musk signed up for a $54.20 per-share price, he agreed to give every shareholder (except those staying on with him) that amount per share. In theory, that should make Twitter’s stock, which for the time being still trades publicly, go for just about $54.20. After all, that’s what a shareholder will get from Musk once the deal closes. In practice, a stock is not going to trade at exactly its acquisition price. Deals aren’t guaranteed to close, especially big ones that might attract regulatory scrutiny. For example, Microsoft agreed in January to buy video game maker Activision Blizzard for $95 per share. The day of the announcement, Activision’s stock price jumped from about $65 to about $82—a huge leap, but not to the agreed-upon price of $95. Markets acknowledge that things happen, and Activision’s stock has hung in that high-70s-to-low-80s range for several months.
In the case of Activision and Microsoft, markets have a clear reason to worry: The Federal Trade Commission has an antitrust bent right now, Microsoft is already a dominant player in video games, and it stands to reason that the government might get in the way of its deal for more video games. There has been way less smoke about an antitrust hurdle stymying Musk’s Twitter deal, since the only sector in which Twitter dominates is career self-immolation. But after Musk’s spree of stock purchases pushed the stock price up to about $50, it has steadily declined in the last few trading days. At Monday’s market close, it was at $37.39.
I don’t know what I would make of that, but what I wouldn’t make of it is that investors expect Musk to actually pay $54.20 per share to take control of Twitter.
Theory 2: Musk Is a Troll and He Is Mostly Trolling
Musk is the counter to a frequently posed hypothetical among nonrich people, which is that if they were rich, they’d never check Twitter. He really, really likes to post. He is the only person anywhere near his net worth who is on Twitter for the love of the game, rather than because he needs to do it to Get His Message Out (though he does that too and has made tons of money on Twitter) or shill his wares. Jeff Bezos is sort of getting into it now, but Musk has a particular habit for tweeting things that one man might see as blowing off some steam or just putting ideas out there, but that others might see as securities fraud or defamation. He also might tweet about how a guy he thinks shorted Tesla’s stock is ugly:
If you subscribe to the worldview that Musk stirs the pot for the sake of it, that he craves the sweet, sweet hit of the retweet counter going up, up, up, then you might think that all of his tweets antagonizing Twitter, its executives, and its staff in recent days have been just that: his version of fun. He is aware that markets move with his every public utterance, that journalists will breathlessly report on anything he does, and that the Twitter execs he doesn’t seem to like will get annoyed by all of this. Pissing them off might be legitimately valuable to him!
Another group Musk clearly enjoys bothering is the Securities and Exchange Commission. After he started buying Twitter stock in bulk earlier this year, he filed the required SEC document 11 days too late, and it was the wrong document. As University at Buffalo accounting and law professor Michael Dambra put it to me: “Elon does what he does. I think he does like to troll the SEC, and historically the punishments for these delayed filings are small.”
Nobody said pot-stirring had to be limited to the internet.
Theory 3: Musk Doesn’t Want the Deal at All and He’s Trying to Nuke It
In Twitter’s current state as a public company, you could argue that owning it is kind of cool if you are a rich person or big institutional investor. Nobody owns more than a small fraction of it, and if you bought at the right time or were involved from the start, you might have made a lot of money on the stock. But running Twitter has to be miserable. There cannot be joy in playing referee on a messaging platform that happens to be a favorite toy for political and media elites, who will think that every action you take is either smothering the body politic with censorship or drowning it in a sea of misinformation. Musk has been casually flirtatious of late with far-right commentators who think he’s going to free them from the shackles of Orwellian thought policing, like not being allowed to tweet that vaccines cause AIDS. I do not think such burgeoning friendships can last forever, because the free speech maximalism Musk has espoused is going to alienate both non-far-right users and the advertisers who pay Twitter to reach them. If he wants to quintuple Twitter’s revenue, he is going to do content moderation, and that moderation is going to sweep up conservatives who will decide they don’t like him.
If Musk is profit-motivated and not just blowing billions of dollars to play God on his favorite website, the theory that he now wants out of the deal altogether might click. It isn’t just that Twitter is a notoriously hard place to make money, but that Musk has bigger fish to fry. Most of his wealth is in the stock of Tesla, his prized electric car company. Since April 1, the last trading day before Musk revealed his first big buying spree of Twitter stock, Tesla shares have gone from about $1,081 to about $724, a loss that exceeds even the ugly recent stock market. Assuming Musk still owns about 172.6 million Tesla shares, that stock drop has shaved something on the order of $60 billion off his net worth. (You can do your own napkin math.)
Musk signed a contract that makes it hard and expensive for him to back away, but there could be a world in which he decides that following through is harder and more expensive. If Tesla’s investors aren’t happy about Musk devoting time and energy to the raging inferno that is Twitter, that stands to cost him incomprehensible sums of wealth. It is also possible that if Musk owns Twitter, his social media company could become a geopolitical pressure point that makes headaches for his car company in China. Nothing could happen at this point that would make Musk not be insanely rich, but there are different tiers of insanely rich. I think Musk likes being in the highest one. And maybe, just maybe, he has decided he enjoys that rare air more than he would like attempting to govern a platform that is inherently ungovernable.
Update, May 17, 2022, at 8:26 a.m.: This article was updated to include Musk’s tweets from Tuesday morning.