Posted by Thomas Cowden.
Everything changed on July 8th when Elon Musk decided he no longer wanted to purchase the $44 billion company Twitter. Elon Musk had been slowly growing his position of Twitter until he became the largest individual investor and agreed to purchase the company. As his concerns of Twitter grew, he pulled back on his decision to buy the company. He backed out of the deal. This has led to a court date on October 17th where Musk and Twitter will faceoff in Delaware Chancery Court. The case will be decided by Chancellor Kathaleen McCormick.
Elon Musk became discouraged to purchase Twitter mainly because of fake account and spam bots. He claims that the company was not able to give him an accurate estimate of what percent of twitter users are spam bots. Spam bots pose several problems including spreading false information, incite violence, and influence politics. This Wall Street Journal article tells us that “Twitter estimates that such accounts represent less than 5% of its monetizable daily average users, but says that the actual number could be higher. Mr. Musk argues that the figure is far higher” (Needleman, 2022). Musk, already having a heavy following on Twitter, has likely been exposed to spam bots firsthand. Elon Musk also claims that he was not consulted on business changes Twitter made including matters regarding personnel. This combination of issues caused Musk to back down from the purchase. Here’s what twitter had to say about this.
Twitter makes the claim that Musk is putting too much of the blame on spam bots to get out of the deal. Twitter believes the underlying reason Musk backed out of the deal was because market conditions got worse, and it effected his wealth. Twitter is now reaching out to everyone from investors, friends, and banks for information on communication for the deal. They are trying to figure out if he had any other concerns around the purchase of the company. I find it unlikely that Twitter wins this case. If Chancellor McCormick finds that Twitter misled Musk on the topics of spambots he would be cut loose.
Thomas is a finance major at the Stillman School of Business, Seton Hall University, Class of 2025.
Article Link: https://www.wsj.com/articles/elon-musk-twitter-trial-delaware-court-11661809622?mod=article_inline