People seem to be discounting the fact that Elon still owns 9% of the company and is one of the largest shareholders. He just wants a chance to renegotiate as he know if he actually walks away he will lose around $5B.
If he's allowed to actually walk. Legally speaking he waived due process and twitter is suing with the specific performance clause. If it were just about anyone else I'd say there's 0 chance they'd be getting out of this, but since it's musk he might be able to walk.
He signed that he knows everything he needs to know about the company and wants to buy it. Now he wants to back out with the claim that he actually did not know everything, which is a pretty hard sell.
Though it's important to note that his lawyers are well aware that this will never fly and therefore the actual court case is them trying to find an edge case where Twitter actually broke the contract (that's the shoddy talk about Twitter apparently rate limiting the data analysis). Which is still a hard sell, but there's at least a chance they'll get away with it.
As Levine has pointed out repeatedly, the statements he's claiming are false are pretty hard to falsify, as they essentially include the string "this statement might be false".
And the "not related to the deal" part is the problem - even if he wins this claim, this does not necessarily constitute MAE and therefore does not get him out of the deal. Due diligence includes verifying those numbers or at least checking where they come from, especially if they are as important to the deal as they now appear to be.
"Due diligence" is the diligence (= carefulness) that you should exert before signing on the deal. Don't trust what the other side tells you. Instead, check.
"Due process" is the legal steps that have to be followed in a court case (especially a criminal one). You can waive due process - if you're not going to make the government work through all the steps, because you know that it's not going to get you any benefit in the end, say.
They don’t mean the same thing, but the reason he’s giving for walking away (an estimate of the fraction of mDAUs that are bots) is not a valid reason under the contract. It would have to be a material statement (ie. affect the value by 25%, iirc), plus the phrasing in the filings was “In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated.” The filing basically says nothing, so it can’t be wrong in a material way.
Of course, if Elon's right, and Twitter has been showing ads to way more bots than anyone else has realized[0], than that's gonna seriously tank Twitter's value.
So my question is: what did he learn between the point when he decided to buy all those shares at a high price and the point where he started making a stink about bots? He hasn't made any claims based on new information. Did he just spend a massive amount of money on Twitter stock with zero idea of how much it should actually be worth, and only have second thoughts after signing a deal to buy the company? There's no scenario where his actions look economically sound, so the implausible-on-the-face-of-it "do it for the lulz" argument seems like one of the last best guesses available.
[0] the internet ad space is filled with players, and generally a low-trust industry for obvious reasons, so this claim strikes me as extremely dubious, but here we are
You may not have thought this out. Why would an upwardly-revised bot count number, even a drastically revised number, tank Twitter's value? Click fraud has been an open secret for decades and did essentially nothing to harm Google's financials. People who buy large blocks of Twitter advertising do so for outcomes they themselves measure financially, not based on synthetic metrics.
If you don't have an especially clear answer to how that revision would harm Twitter's bottom-line numbers, my understanding is that you'd have essentially no hope of convincing the Delaware Chancery Court that a "material adverse event" had occurred. And that's, of course, before you get to the fact that the numbers we're talking about are hedged in the SEC filings.
> "do it for the lulz" argument seems like one of the last best guesses available
Or Musk is, was, and always will be, a financier, and is doing all this because at some point it made sense to his broader financial plans - dumping Tesla stock near its peak and minimizing the fallback.
Then there was you know, an economic collapse, shortly after this started going into motion. Maybe, I don't know, the financial collapse had some impact on the cost/benefit and changed the course?
Why do people always throw out the simplest most obvious solution in favor of conspiracy and cult-of-personality worship ("do it for the lulz")?
1) Musk wanted to offload Tesla (which he himself said was overvalued). Twitter was as good a reason as any to do so.
2) Economic collapse made the deal unfeasible.
3) When you owe the bank a billion dollars its the banks problem, Musk knows the deal is worthless and is more then happy to let the courts settle it to optimize his personal costs.
This theory certainly has logic to it but, at this point, is "acting before he thinks" really not an option for "simplest most obvious solution" for Elon Musk's non-SpaceX/Telsa-core-business-decision actions? How many more 4/20 references does he need to sneak in?
He disclosed his share in early April and then signed the deal in late April. TWTR today is about where it was from January-April pre-news-of-his-investment, so the value of his initial Twitter investment actually looks pretty stable even post-"economic collapse" (the Dow, for instance, is down 10% over this period, hence the square quotes - obviously no picnic, but did people think the crazy 2020 runup wouldn't lead to a correction?). TWTR has already largely corrected from it's 2020/2021 peak, other than that it fairly steadily went up to be almost double what it was worth 5 years ago, still seems like a solid buy if you're trying to diversify your Tesla holdings that grew way more quickly than that.
TSLA is down 37% meanwhile from April 4 peak before the Twitter drama started. If that's because of the deal, and if that's weighing on his plans now, clearly even in the most rational case he wildly mis-judged that one.
And in getting out of some TSLA he also got INTO a bunch of TWTR (unless possibly he already sold that at the peak?). Which he now seems determined to tank the value of.
But heck, since Twitter is still valued about where it was before, but Tesla has fallen, "getting out of some Tesla stock for something more stable" seems to still make a lot of sense. He thought it was worth buying at this share price before, he even made an offer to pay a big premium (against a higher price driven by the news of his move, of course), so... what of that was unforseeable or seems dramatically different.