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Today a rant about Elon Musk Twitter and what comes next in this strangest romance in Tech.
So, the news and short, which you probably already know is Elon Musk said he’s terminating his agreement, to acquire Twitter, Elon Musk said Twitter, misled him over the number of spam Bots.
Elon Musk said, Twitter won’t give him enough information about the density of said spambots.
Now I’m emphasizing Elon Musk said because he Lon Look says a lot of things and just because Elon Musk says them doesn’t make them true or legally, binding, or even legally relevant.
What is true and legally, binding and legally relevant?
Is that musk has a merger agreement with Twitter, which Twitter says it will try to uphold in court, just buy everything else that Muska.
Saying so Twitter’s like in a bride being dumped at the altar, holding up the marriage contract, The Runaway groom like read the fine print Buster, we’re way past speak now or forever hold Your piece.
You want a divorce, it’s going to cost you and I’ll see you in court and that is basically what Twitter is saying in response to Elon musk’s attempt to break up with them.
Twitter’s, chairman of the board.
Bret Taylor responded on Twitter quote, the Twitter board is committed to closing the transaction on the price and terms agreed upon with mr.
Musk and plans to pursue legal action.
To enforce the merger agreement, we are confident, we will prevail in the Delaware Court of Chancery and quote.
What is the Delaware Court of Chancery?
Perfect sequence of words, Court of Chancery it resolves disputes between companies based in Delaware.
And Twitter is based in Delaware.
So, that’s where we are.
Elon Musk said, I want out Twitter said, nope, we’re already married time to talk about why this is happening and what is likely next.
So why is this happening?
As I said, when Ilan first announced his Vine Twitter, when a car and Rockets executive who made his name and digital payments, buys a website where people scream at each other about the news.
Anyone who’s extremely confident about what’s going to happen?
Next, does not know what they’re talking about.
And indeed a lot of people who were extremely confident about what would happen?
Next, turned out to not know what they were talking about, but I can imagine at least three scenarios for why Ilan went through this whole topsy-turvy rigmarole scenario.
Number one, is that Elon Musk is telling the full truth.
He cares about the Bots.
He’s a guest about the Bots.
You want to Twitter but he took a close.
Look at it, turns out that social media is a mess and it’s fake.
It’s got a bunch of fake accounts and it pains him, it pains him to see all of these Bots.
This is completely laughable, but I’m willing to bend over backward and take it into even a little bit more seriously than it deserves.
So in its SEC, filings Twitter has said that about one in 20 of its daily.
Active users are Bots, false or spam accounts, elon’s Central claim in this.
And in the document that his lawyers sent Twitter is that Twitter is quote dramatically understating, the proportion of spam and false accounts now.
Is it possible?
Is it possible to Twitter says that 5% of its accounts are fake?
But actually 6.7 percent of its accounts are fake.
Of course, it’s possible.
But the reason it’s really, really hard to take this excuse seriously, is that the overpopulation of bots is one of the reasons Ilan said he was obsessed with taking, Hangover Twitter on April 21st, Ilan.
Tweeted quote, if our Twitter bid succeeds, we will defeat the spam Bots or die.
Trying end quote, do you see?
You can’t say, I want to take over the sandwich shop and clean up the kitchen.
And then, after signing the contract say, I’m suing you to get out of this deal because I checked the kitchen and it’s filthy.
You just said you were going to clean up the kitchen or die.
You just said.
Add that this looks unbelievably hypocritical.
And that’s why I don’t think we can take it.
Very seriously, is that brings us to scenario?
Number two, scenario number two is that this was always a prank.
A lark, oh, wimzie Ilan.
Didn’t really want to buy Twitter, Jack, Dorsey just sort of voodoo brained him into buying it, or maybe he bought it, and then he just immediately lost interest.
Like, you know, someone who’s only in it for the chase.
Yeah, I can’t roll this out but like feeling extremely confident, about a psychological explanation.
Requires a lot more information about Elon musk’s psychology.
Then I have access to.
So I don’t want to put too much stock in this scenario.
Number three is that this was always a ruse, a ruse to conceal.
The fact that Elon Musk needed to find some clever way to unwind Tesla stock without freaking out the markets.
I saw this this Theory floating around quite a bit on Friday.
The venture capital is Josh Wolf was musing about it.
I think this is very clever.
Very, very clever and probably too clever by half like Elon if he wanted to execute the Tesla stock, sell plan should not have signed a legally binding document to buy Twitter like think about this.
He should have sold the test.
The stock tweeted that this was entirely about freeing up cash to buy Twitter and then just never sign the merger agreement so that nothing could be enforced by the freaking Delaware Court.
It’s a much better plan.
Don’t freak out.
Sell your test of stock, take it in cash and before anyone can freak out, say I’m going to use this cash to buy a company that you never signed a merger agreement to actually buy much better plan.
He didn’t do it.
That tells me that at some point this was actually about buying Twitter rather than about not buying Twitter and that takes us to scenario number four which is which is the scenario that I prefer The price ain’t right.
And Elon Musk might be the most unrelatable person in the world but this is totally relatable it.
Maybe it’s stupid, maybe it’s weird but it is totally relatable.
The market has crashed the price.
He’s on the books or on the hook for Dubai.
Twitter is high.
This deal sucks for him.
Like imagine if you’re trying to buy a house right?
There’s a house down the street beautiful Corner, you’ve always loved it but a crazy family lives there.
Absolute nut cases, everybody agrees this house would Be so wonderful.
If somebody else owned it and then one day the family, lets it be known that there may be putting up the house for sale and boom.
You spring at the opportunity, you make a huge sudden rash bid, 1 million dollars, bam on the table way more than any Zelo estimate.
And the family of the house is like, you know, we’ll look at your offer.
I’m not so sure you say I’ll waive diligence a weave inspection.
I don’t care.
I don’t need to see if there is mold in the kitchen or a sinkhole in the in the bathroom.
I need this.
Was now here’s my Ironclad purchase agreement.
Give you the house and they’re like, okay fine, here’s the house, congratulations.
Have your dream house but then everything goes wrong Days.
Later your financial advisor calls.
Sorry that emerging market fund.
We went all in on its down 50%.
Realtor comes out with report on housing values in the area and determines the average home value in that neighborhood.
You just bought in plummeted by like 70% in the last few weeks that just two seconds ago you had.
A beefy portfolio to pay a small premium for your dream house.
And now that portfolio is tanked and the price you offered for the house is way above its market value.
Like, what would you do in this situation?
What would you literally do?
Is it so implausible that you’d call your lawyer and be like, dude, get me the hell out of this.
I don’t think it’s much more complicated than that.
Twitter was elon’s dream house.
Then his Core Business, Tesla tank financially taking down his net worth with it and creating a bit of a Is the required, his attention that needed to shift away from Twitter Akira, some numbers between April when musk was finalizing this offer and July.
Tesla stock crashed, 40%.
So we can assume that musk’s net worth took a similar hit as for Twitter.
It’s hard to say where the company’s stock should be because it’s currently held Aloft by the musk contracts and all likelihood but we can make an estimate by looking at its closest proxy which is snap the owner of Snapchat snap is also a social media company and it also is an advertising company and it’s April High snap is worth about 70 billion dollars by July.
Its market cap had fallen to about twenty six billion dollars.
If you apply that same depreciation math to Twitter, you’re looking at a company that should be valued around 15 to 20 billion.
Dollars must contract says 44, 44 billion dollars for a company that should be worth, maybe 17.
This deal sucks.
It just might not be more complicated than that musk once out of this deal because this deal sucks.
So, what’s next?
Well, who knows.
A lot of media commentators reported this story by saying Elon Musk cancels.
Twitter deal, Ilan, terminates the Twitter merger.
This is nothing near to that level of finality.
Nothing has been canceled.
Nothing has been terminated what matters here is That would Elon Musk says but that there’s a contract and the contract was written to expedite a sale to bind the parties together.
Not to give Elon Musk 1000 trap doors through which he could Escape whenever he got bored or antsy or nervous, musk is allowed to wriggle out of this deal in the event of a so-called materially adverse change.
That significantly reduces the value of the company like I don’t know everyone’s iPhone disappears or something or is it is determined that Twitter lied?
Something that is of material significance to the company and material significance.
Again, it’s not for musk to decide, it’s not for his lawyers to decide.
It is for our friends at the Delaware Court of Chancery.
So, in my mind, there are three ways.
This thing ends three ways scenario.
Number one is Twitter, caves, Twitter caves either, by letting musk walk or by negotiating a lower price or by negotiating, some sheep breakup deal.
This all seems incredibly unlikely to me like, if you were in possession of a document that you believed to be worth tens of billions of dollars, would you rashly set it on fire to play nice with a billionaire?
I don’t think so and that’s what Twitter has Twitter has with his contract.
A document that is worth tens of billions of dollars that values.
The company at tens of billions of dollars, more than it is likely to trade at in the event that this deal disappears.
So I do not think Twitter is very interested in caving that brings us to outcome number two.
Outcome number two is that they go to court and Elon Musk wins his lawyers.
Win his lawyers persuade.
The court that Twitter’s bought accounting really is fraudulent.
That it really has Something else weird?
That is bad.
There’s a discovery process that’s a disaster for Twitter and the company and its Executives and the company loses to musk.
And after that, it is reputation Ali destroyed.
Because of what comes out in Discovery that is the dream case scenario for Elon Musk.
I think it is.
Also somewhat implausible, which brings us to number three.
And number three is that they go to court and Twitter wins?
They win Discovery is embarrassing for musk and makes clear just how Whimsical and ramshackle this whole acquisition process has been Twitter.
Lawyers persuade, the court in Delaware, that musk’s claims don’t meet any relevant threshold for material adversity.
The court makes musk fund the entire thirty four billion dollar Equity commitment or some extraordinary.
Multi, multi-billion dollar commitment.
He has to sell even more Tesla stock to fund that commitment and now In most of the scenarios he ends up as the proud or not.
So proud owner of a dream house he no longer wants Bill Simmons ones came up with the phrase, the Tyson Zone after Mike Tyson’s Antics to describe times when you truly have no idea what’s going to happen next because every crazy scenario is on the table, I would like to submit that in technology.
We are in the musk Zone here, Elon Musk could win, he could lose, he could buy Twitter, he could sell Twitter, he could jump on a rocket ship and evade the entire court system by moving permanently into low orbit, it is all on the table right now.
I want to end by saying that just because every realistic timeline is somewhat entertaining for Tech observers.
It is also true that just about every realistic timeline sucks for Twitter as a firm right now.
Like if this drags out for months without resolution that sucks for people working at Twitter, if Elon is forced to buy Twitter and doesn’t want Twitter that sucks for people working at Twitter.
And if he long gets away with a breakup fee, well, the stock is probably going to crash at least 50% which also sucks for people working at Twitter.
So, again, this might be entertaining for the tech World listeners for people like me, but I cannot imagine what it’s like to be in Twitter right now in the epicenter of the musk Zone.
That’s all for today.
I’m Derek Thompson.
This is plain English.