Elon Musk looks poised to buy Twitter after all. After first agreeing to buy the social media company for $54.20 per share ($44 billion in total) in April, spending months laying the groundwork to back out of it, and then getting himself into a messy, expensive lawsuit that was to go to trial this month, Musk looks like he is waving the white flag. Much of the financial press reported on Tuesday that Musk’s lawyers sent an overnight letter to Twitter, and filed one with the court in Delaware that was to hear the case, that said he would buy Twitter at the agreed price from April. Nothing, the news outlets caution, is final yet. [Update, Oct. 4, 2022, at 4 p.m.: Twitter says it intends to close the deal.]
While reporters scramble to cancel their Wilmington hotel bookings, we’re all left to ask a question that Musk may never answer honestly: Why? It was clear enough why he wanted to back out of the deal he’d initially signed: Financial markets tanked in the subsequent months, and the market capitalization of Twitter as a public company lagged well below what he’d agreed to pay to take it private. (He had already offered a premium-slash-weed joke to make the deal.) Musk screwed around a lot and field-tested various legal arguments, mostly settling on something he clearly did not care about (the percentage of Twitter users that were not real humans) before adding on some charges related to a whistleblower.
Here are four theories as to why Musk is now changing course. Let’s loosely rank them from “by far the most likely” to “certainly in the realm of possibility,” which covers almost anything when it comes to Musk.
Theory 1: Musk thought he was going to lose at trial and be forced to buy Twitter, and he doesn’t want embarrassing information to come out in the coming weeks.
Lawsuits mean discovery. Subpoenas have been flying all over the place in this one, to the point that the whole world got to read dozens of pages of Musk’s text messages just last week. Between now and the trial, which was set to start on Oct. 17, we could’ve gotten to learn plenty more about Musk’s business dealings. He was set to sit for a deposition just this week. Closing the deal on the agreed terms would mean no trial and, depending on how various timings shake out, no deposition and no more Musk texts.
Maybe all that sunlight is no big deal. Musk has a lot of money and not a lot of shame. He may not care much about the general public getting an even more intimate window into his talks with his bankers, prospective co-investors, ex-wife, or anyone else. But consider that Musk was fighting an uphill battle in the case, according to most qualified observers who have analyzed it. The Delaware Court of Chancery does not love bullshit, and bullshiting would be a rather generous way of describing Musk’s approach to the Twitter acquisition. (This includes how he approached Securities and Exchange Commission regulations while buying shares.) Anything can happen in a trial, but one can imagine Musk’s lawyers framing up the situation for him: “You’re going to sit for hours of deposition. More documents are going to come out. We don’t like our chances. You’ll still have so much money.” Perhaps Musk just decided to call it a day.
Theory 2: Everything in the first theory is still true, and Musk found more money from other investors who made buying Twitter less of a sticker shock for him.
Much of this was already public knowledge, but one of the things we learned from a recently released batch of Musk’s texts was how intent he was from early on in finding outside financing to make the deal. Most of Musk’s roughly $235 billion net worth is tied up in Tesla, and while he sold some Tesla stock while putting together the funds for Twitter, he clearly did not want to sell too much. He also ditched a plan to use a bunch of Tesla stock as collateral for his loans to use in the Twitter deal. All of that is to say that even the world’s richest person has a point at which he gets uncomfortable dipping into his own pocket.
The other clear theme of Musk’s texts is how easy it is to get people to give you money when you’re Elon Musk. Maybe he magically found billions of dollars of additional financing from banks or venture capitalists or wealthy individuals who don’t even believe in Twitter but saw a chance to do a solid for the richest dude in the world and thought, “Sure, that’s worth sinking a few bil into a company I don’t really care about.” It seems like Musk could raise capital at a rate of something like $1 billion an hour if he really wanted. Actually, strike that. Musk’s banker at Morgan Stanley texted him with one opportunity to get $5 billion in an hour at one point from FTX founder and cryptocurrency billionaire Sam Bankman-Fried.
A lot of rich people seem to care a lot about Twitter. Larry Ellison cares. One angel investor named Jason Calacanis told Musk, “You have my sword. Put me in the game coach! Twitter CEO is my dream job.” That guy told Musk he’d jump on a grenade for him but spelled it “grande.” I assume that if Musk told him to personally find him $10 billion for Twitter and also give Musk his firstborn child, he’d do so in seconds.
Theory 3: Musk is still playing games, and this is somehow part of a pretrial maneuver.
It’s worth quoting from the Washington Post on Tuesday afternoon:
Twitter is considering the proposal, and will not act for at least another day, according to [a source]. Because there is great distrust on both sides, Twitter leaders are questioning whether the letter represents a legal maneuvering, this person said.
And from the Wall Street Journal around the same time:
There are no guarantees they will reach a deal and the trial could still go forward as planned.
Some skepticism is wise, especially on Twitter’s part. There is less than zero reason to take Musk at his word, and as he demonstrated when he signed heavily lawyered papers to buy Twitter and then set about not buying Twitter, even legal filings and signatures are in no way a guarantee that he will stop being a pain.
Until Musk’s money is literally in the accounts of Twitter’s shareholders, it will be almost impossible to categorically rule out that he’s somehow working the deal from both ends. That’s not to give Musk credit as some sort of conniving genius, but to acknowledge that his mind changes all the time, he has a history of making whimsical decisions with billions of dollars at stake, and things happen. [Update, Oct. 4, 2022, at 4 p.m.: The letter Musk’s lawyer filed with the court says his purchase is conditional on the court entering “an immediate stay” of the case. If for some reason that might not happen, then who knows?]
Theory 4: Musk had a change of heart and thinks he’s making a good deal for Twitter.
Probably not this one. But one never does know.