Elon Musk backs down and will buy Twitter

They say that a timely withdrawal is a victory, and this saying is probably totally applicable to the step taken by Elon Musk regarding the purchase of Twitter. Although, to be more exact, we should talk about the withdrawal of a withdrawal, since according to what we can read in the Associated Press, Elon Musk has decided to back down from the controversial withdrawal of his offer on Twittertaking it back exactly in the terms initially subscribed.

this move recovers the price per share of $54.20initially agreed between the parties, and the proposal would have been sent by Elon Musk just a few hours ago (in the middle of the night, in the United States) to Twitter, which according to the sources cited in the first information, would be studying at this time if they accept the offer or if, on the contrary, they prefer to follow the judicial path, which began a few months ago and which will take both parties to court as of October 17, as determined last July.

Prospects have been bleak for Elon Musk from practically the beginning. The legal process began, and eventually could still be completed, in Delaware, a jurisdiction in which the legal framework usually favors the completion of purchase processes, mergers, etc., and to this we must add the record of the judge, Kathaleen McCormick, which also has a clear trend in this regard, something that was already proven when the togada, when defining dates and deadlines for the process, positioned itself along the lines of Twitter, not Musk.

The argument used by Musk to back down on the purchase of Twitter has been, from the outset, that the presence of bots in the social network would be much higher than that quantified by the company, which speaks of 5%. However, his big problem is that he has not been able to support this accusation with concrete data. And despite this, already in May he put the purchase process on hold, publicly discussed with the CEO of Twitter and, of course, played the trick of asking for a discount on the purchase price. All this, I repeat, relying on an accusation that he was never able to prove.

Elon Musk backs down and will buy Twitter

A) Yes, the noise of judicial drums began to be heard even before Musk decided to back down. Both by the current board of directors, with whom the purchase operation had been negotiated, and by other investors with interests in the social network, and who saw the price of shares drop substantially due to the accusations and movements of Elon Musk. No one was surprised to learn that the Twitter board, led by Parag Agrawal, ended up prosecuting the process.

Since then, the main objective of Elon Musk’s legal team has been to delay the trial as long as possible. At the hearing to define the terms of the trial, in which it was determined that it would take place in October, the defendant’s aspiration was that the hearings would take place in March of next year, compared to Twitter’s aspiration, which He asked that they be held in the (already past) month of September. Nevertheless, in these months there have been more attempts to delay the trial. Unsuccessful attempts so far.

Thus, this places us less than two weeks before Monday, October 17, the day scheduled for the first of the five days of the trial and, as we reported yesterday, Musk’s attitude did not seem remotely the most appropriate to face the judgment. A point where It did not seem that the billionaire’s legal and technical team had managed to document this alleged massive presence of bots and, therefore, a countdown in which the pendulum would swing over Musk’s head like a sword of Damocles.

Elon Musk backs down and will buy Twitter

Thus, in the current circumstances, the situation indicates that Twitter has everything to win and, consequently, Elon Musk all to lose. Either having to pay a millionaire indemnity or having to complete the purchase process, but in both cases with having to face high additional costs, the negative impact on Musk’s accounts seemed guaranteed and this is, most likely, the Which is why I would have decided to back down.

In the absence of confirmation, the letter sent by Elon Musk to the Twitter board would be proposing resume the operation exactly where it was when you decided to pause itwhich we understand should lead to Twitter withdrawing its complaint and, therefore, canceling the trial in two weeks.

Now, at this point the ball is in Twitter’s court. It is true that, during these months, and in the face of Musk’s erratic behavior, the aspirations of the board of directors and the shareholders have always seemed aimed at completing the purchase operation. However, and given the prospects of success in the judicial confrontation, we must not rule out the possibility (remote, but existing) that Twitter decides to take the judicial process to the end, given the possibility of that the result of it is even better than completing the purchase in the original terms.

Be that as it may, and although the price of Twitter shares has been suspended shortly after learning of Elon Musk’s change of plans, the market’s reaction has been immediate, with the price of its shares skyrocketing in the short interval of time between when the news broke and when the price was suspended. And it is that, as you can see, in five minutes the shares have risen from $42.81 (the price just before the rising line) to $47.93, where they have been frozen. However, if the purchase is finally confirmed, this listing is already worthless, as the securities will eventually be purchased by Musk for $54.20 per share.

Elon Musk backs down and will buy Twitter

And what should we expect next? As I indicated earlier, the ball is now in Twitter’s court. And although the current board of directors may choose, as we have already stated, to extend the judicial route, I see much more likely that they opt for what they have always wanted, which is to complete the sale operation.

Now, we must remember thathe agreement between the parties does not necessarily imply that the operation is finally completed. Once the operation is reactivated, it will have to go through the supervision of the regulators, which can give the green light or, perhaps, establish new conditions for the operation. It seems unlikely, however, that a regulator decides to block the purchase. Europe has already ruled on this and it seems unlikely that the new management, headed by Musk, will not adapt to these requirements.

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