Billionaire Elon Musk is proposing to proceed with his original $44 billion bid to take Twitter Inc private, security filings showed on Tuesday, calling for an end to a lawsuit by the social media company that could have forced him to pay up, whether he wanted to or not.
An agreement would put the world's richest person in charge of one of the most influential media platforms and end months of litigation that damaged Twitter's brand and fed Musk's reputation for erratic behaviour.
Musk, the chief executive of electric car maker Tesla Inc, will take over a company he originally committed to buying in April, but soon soured on. Late on Tuesday, he tweeted that buying Twitter would speed up his ambition to create an "everything app" called X.
The renewed offer comes ahead of a highly anticipated face-off between Musk and Twitter in Delaware's Court of Chancery on October 17, in which the social media company was set to seek an order directing Musk to close the deal for $44 billion.
Musk sent Twitter a letter on Monday that said he intended to proceed with the deal on the original terms of the Delaware judge stayed the proceedings. A source familiar with Twitter's team told Reuters that at a court hearing on Tuesday morning the judge requested the two sides report back in the evening.
It was not immediately clear why Musk chose to abandon his fight, although some pointed to his scheduled deposition. "He was about to get deposed and a lot of uncomfortable facts were going to come out," said Eric Talley, a professor at Columbia Law School.
Twitter received Musk's letter and intended to close the deal at the original price, a spokesperson told Reuters. Twitter did not say whether it accepted Musk's offer. Musk, one of Twitter's most prominent users, said in July he could walk away without penalty because the number of bot accounts was much higher than Twitter's estimate of less than five per cent of users. Bots are automated accounts, and their use can lead to overestimations of how many humans are on the service, which is important for advertising rates and the overall value of the service. Twitter's legal team on September 27 said that scientists employed by Musk estimated the number of fake accounts on the platform at 5.3 per cent and 11 per cent.
"None of these analyses so far as we can tell remotely supported what Mr Musk told Twitter and told the world," Twitter lawyer Bradley Wilson told the court. The original deal was "a very seller-friendly agreement that would be very difficult to get out of," said Adam Badawi, a law professor at UC Berkeley.
Musk realised, he said, "in all likelihood, it was going to result in forcing him to close at $54.20 a share."Musk was relatively quiet on Twitter during the day, but late on Tuesday he tweeted that "Twitter probably accelerates X by 3 to 5 years". That echoed suggestions he made to Twitter staff in June about creating a "super app" or marketplace for different apps and features like WeChat, which is popular in China. Musk also has said he wants to create a money transfer feature.
The settlement between the two sides would revive fears among Twitter's users about Musk's plans for the platform, which has removed prominent politically conservative voices. Supporters of Donald Trump hope that Musk will reactivate the account of the former US president, who was banned after the January 6, 2021 attack on the US Capitol by his supporters.
Musk has used Twitter to stir controversy, including on Monday when he floated a peace plan for the Ukraine-Russia war that drew swift condemnation from Ukraine's president, Volodymyr Zelensky. Bloomberg was the first to report Musk was willing to pay the original price. Musk also said his offer was contingent on
stopping the legal proceedings. A settlement at the original price would also allow Musk to finance the transaction without any complications.
If Musk and Twitter had renegotiated the price, it would have technically allowed committed backers to walk away. Musk has already sold $15.4 billion worth of Tesla shares since agreeing to buy Twitter.
Musk has also secured a financing commitment from banks - including Morgan Stanley, Bank of America Corp, Mitsubishi UFJ Financial Group Inc and Barclays Plc - to provide a $12.5 billion margin loan to support his Twitter acquisition.
The banks that agreed to finance the acquisition are likely to lose hundreds of millions of dollars on the deal because they would struggle to attract investors to buy the debt, given the downturn in markets since the deal was signed. However, the banks agreed to provide the financing irrespective of whether they can sell the loans and face long legal odds freeing themselves from the financing commitment, according to regulatory filings. Since Twitter has already received shareholder support for the sale to Musk, the deal could close quickly in the coming weeks if the two sides were to settle on the original terms.
Icahn had Twitter stake worth over $500m before Musk's about-face
Activist investor Carl Icahn amassed a Twitter stake worth more than $500 million in the past few months and made a sizable profit on Tuesday after Elon Musk proposed to go ahead with his takeover of the social media platform, the Wall Street Journal reported.
Twitter shares jumped more than 22% to end at $52.00 on Tuesday after a securities filing showed Musk intends to go ahead with his April offer of $44 billion to take the company private, signalling an end to a legal battle that could have forced Musk to pay up.
Icahn paid in the mid-$30s a share for the stake, the report said, citing people familiar with the matter. The estimated profit for Icahn Enterprises LP could exceed $250 million, it added.
Icahn made the investment on the belief that Tesla Inc chief Musk wouldn't go through a trial that he looked likely to lose, the report said. He also believed that the stock was worth close to the mid-$30s in the long term. Other investors, including DE Shaw Group and Daniel Loeb's Third Point LLC, also placed bets on Twitter shares in recent months and could make sizable gains as well, according to the report.
Third Point and Twitter declined to comment. Icahn Enterprises and DE Shaw Group did not respond to Reuters' requests for comment.