Soon after, Musk agreed to buy the social media firm for $44 billion but quickly tried to back out of the deal, leading Twitter to take legal action against him. With the Musk v. Twitter case set to commence shortly, it appears the tech billionaire has again changed his mind on the deal.
Musk wanted to utilize his newfound power to change how the company handles controversial profiles and posts on the platform. The Twitter (NYSE: TWTR) Board of Directors offered him a spot among its ranks, but he quickly spurned the offer when he realized that other Directors would not support his plans.
After opting to forgo a Board spot, Musk offered to buy Twitter and take it private at $54.20 per share, a substantial premium to the company’s valuation immediately before Musk’s involvement with the company. Due to their fiduciary duty to shareholders and the considerable price premium, Twitter’s Board of Directors were forced to accept Musk’s offer, whether they wanted to or not.
Immediately after Twitter accepted the deal, Musk threatened to pull out of the deal over Twitter’s problem with fake accounts. Despite Twitter repeatedly claiming that less than 5% of accounts were so-called bots in financial filings, Musk claimed that the actual amount was over 20%.
Musk ultimately attempted to pull out of the deal, prompting Twitter to file a lawsuit to force the sale. Due to their repeated disclosures around the bot issue and Elon Musk initially declining to do proper due diligence on the company, Twitter lawyers believed the company had a strong case; they requested and were granted an expedited trial due to start in the coming weeks.
Source: Fox Business YouTube
However, Musk appears to be backing down from his threat to abandon the deal. Perhaps realizing how strong Twitter’s case is, Musk recently filed a disclosure with the SEC that he would be moving forward with the deal at the originally agreed-upon price.
Now that it appears that the sale will go through, Musk could take ownership of Twitter in a matter of weeks. Twitter shareholders benefited greatly from the renewed deal, with the stock gaining 22% the day of the announcement, closing nearly all of the arbitrage gap.
After nearly a year, the Elon Musk and Twitter drama is approaching the end stage. How the platform will look moving forward is uncertain, but Musk has stated that he plans to curtail censorship and restore previously banned accounts significantly. Fortunately for shareholders, they will have already cashed out prior to what will likely be a bumpy road moving forward.
Shares of Twitter closed the day at $51.30 per share, down -1.35% on the day. YTD, TWTR stock is up +20.25%.
* Attention readers on mobile or tablet, if you cannot view the above chart entirely, please rotate your device sideways. Make sure you have your portrait orientation lock switched off.
Disclaimer: Wealthy VC does not hold a long or short position in any of the stocks mentioned in this article.