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Levine: Musk Lost Interest in Pretending to Buy Twitter

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Elon’s Out
Musk misplaced curiosity in pretending to purchase Twitter.
Bloomberg, July 9, 2022

 

 

I’ve sometimes spotlighted the e-newsletter / commentary written by my Bloomberg colleague Matt Levine (See, e.g, thisthisthis, or this). No one cuts by the complicated world of Securities Regulation, M&A and SEC laws like Matt. Right here is an excerpt of his most up-to-date put up. You possibly can subscribe at this link.

 

 

Oh Elon

I feel it’s useful to start out with the large image. Elon Musk is the richest individual on the planet, and, like many different wealthy folks, he has some uncommon and costly hobbies. Considered one of his hobbies is that he generally likes to fake that he’ll purchase public firms.1 He appears to seek out this enjoyable, and why not? When he pretends that he’ll purchase a public firm, it creates a giant drama with him on the middle of it. He will get to boss folks round, mobilize legions of bankers and legal professionals and financing sources and random hangers-on2 hoping to get the deal carried out, after which when he will get bored he can inform all these folks to go house. “Haha bought you,” he can say, they usually can all have a great snigger, or he can anyway.

That is an costly interest! When Musk pretended in 2018 that he was going to take Tesla Inc. private, he needed to pay the US Securities and Trade Fee a $20 million fine and cease being the chairman of Tesla’s board. You’re probably not speculated to go round pretending that you’ll purchase a public firm; the SEC generally considers that securities fraud. However Musk may be very wealthy and he can simply afford to pay $20 million for his little joke. His urge for food for pretending to purchase public firms was, apparently, undiminished.

So this April, Musk announced that he wished to purchase Twitter Inc. Why not? Musk appears to get a lot of joy out of using Twitter, and pretending to purchase Twitter is an efficient solution to create drama on Twitter. On the time, I assumed that, as with Tesla, he was doing a bit. “Ordinarily,” I wrote, “if a billionaire chief govt officer of a public firm provides to purchase an organization, the percentages that he’s kidding are fairly low. When it’s Elon Musk, the historic odds are, like, 50/50.”

However he shocked me by shortly lining up financing (paying hundreds of thousands of {dollars} of charges to banks for dedication letters) and signing a merger agreement with Twitter. If he was pretending he was going to purchase Twitter, these have been fairly elaborate lengths to go to? However he often goes to elaborate (and costly) lengths for a joke — he offered 20,000 branded flamethrowers to make a joke about flamethrowers, and in addition based Boring Co. to make a joke (???) about tunnels — so who is aware of. Would he line up billions of {dollars} of financing and signal a binding merger settlement with a specific-performance clause and a $1 billion breakup charge as a joke? I imply! No one else would! However he would possibly!

In any case, shortly after he signed the deal, the market went down. Twitter’s inventory closed at $44.48 on April 12, the day earlier than Musk announced his offer; he agreed to pay $54.20 per share (420 is a weed joke). Since then Twitter has absolutely misplaced worth: The inventory closed at $36.81 on Friday, and different social-media shares are down considerably since April. (Snap Inc. is down about 57% since April 13; even Meta Platforms Inc. — Fb — is down greater than 20%.) In the meantime, Tesla Inc. inventory, the principle supply of Musk’s wealth, is down virtually 27% since he introduced his supply for Twitter. Twitter is value lower than Musk agreed to pay for it, and Musk is much less wealthy than he was when he agreed to purchase it. These will not be legitimate causes for Musk to get out of the deal: The legally binding merger agreement that Musk signed with Twitter doesn’t permit him to terminate the deal as a consequence of modifications within the inventory market or his personal wealth. However they’re causes that Musk would possibly need to get out of the deal, even when he wasn’t kidding when he first signed it.

Nonetheless, one ought to stay open to the likelihood that he was kidding when he first signed the deal. “Elon Musk had a well-thought-out enterprise and monetary plan for Twitter that labored within the financial situations of early April 2022, however situations have modified and the mannequin not works” doesn’t strike me as probably the most believable description of what’s going on right here. “Elon Musk whimsically thought it is perhaps enjoyable to personal Twitter, so he signed a merger settlement with out taking it too significantly after which misplaced curiosity every week later” feels extra true to the state of affairs. My first response to his proposal to purchase Twitter, that it was a joke, could have been the right one. He was simply much more dedicated to the bit than I anticipated.

Anyway:

Elon Musk stated he’s terminating his $44 billion settlement to accumulate Twitter Inc. and take it personal, triggering a authorized combat with the corporate.

Twitter has made “deceptive representations” over the variety of spam bots on the social community, and hasn’t “complied with its contractual obligations” to supply details about find out how to assess how prevalent the bots are, Musk’s representatives stated Friday in a letter to Twitter as a part of a regulatory submitting.

Twitter stated it would combat again in court docket.

Right here is the letter, signed by Mike Ringler of Skadden, Arps, Slate, Meagher & Flom LLP, Musk’s lawyer. It … ehhhhhhh. Ehhhhhhhhhhhhhhh. Do now we have to speak about this? Nice. Ringler provides three pretexts for why Musk ought to be allowed out of the deal…

 

Go see the total column here.

 

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1. That is an *uncommon* rich-person interest, however under no circumstances an *unprecedented* one. Famously Donald Trump spent a while within the Eighties pretending he was going to purchase public firms. However he did this as a solution to make cash — by extracting greenmail out of the businesses — whereas Musk appears to do it largely for enjoyable.

2. And, let’s face it, writers of monetary newsletters.

 

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