Elon Musk Admits Tweet on Twitter Deal May Have Been a Mistake

Elon Musk conceded in court that a May 2022 post declaring the agreement to acquire Twitter “temporarily on hold” may not have been his “best tweet,” but defended himself against accusations of market manipulation related to the $44 billion deal. The admission came during a civil trial in San Francisco where investors allege Musk deliberately undermined Twitter’s stock price to secure a lower purchase price. The case centers on a series of public statements and actions by Musk in the months leading up to the completion of the acquisition, now known as X.

The Tweet and Its Aftermath

On May 13, 2022, Musk tweeted that the deal was “temporarily on hold” pending verification that spam and fake accounts represented less than 5% of Twitter’s user base. The announcement triggered a 9% drop in Twitter’s stock price when markets opened, according to reports. A week later, Musk stated the transaction “cannot proceed” under current conditions. These statements are at the heart of the investor lawsuit, which claims Musk intentionally created uncertainty to drive down the stock price and renegotiate the terms of the deal.

Musk testified that his apply of the word “hold” was meant literally – a pause, not a cancellation. “That may not have been my smartest tweet,” he told the court, adding that if his actions led to the lawsuit, “I probably deserve it.” This admission, however, hasn’t quelled the plaintiffs’ argument that Musk’s threats to walk away were a calculated tactic to gain leverage in the negotiations. The investors contend that Musk knew he could ultimately be legally compelled to complete the purchase despite his public doubts.

Barclays Emails Reveal Negotiation Strategy

Emails presented by the plaintiffs’ legal team from Barclays bank suggest a coordinated strategy. Prior to the pivotal tweet, a Barclays banker wrote that Musk’s actions “may give us an opportunity to revisit price,” indicating the bank believed the threat of withdrawal could lower the acquisition cost. Following the tweet, Barclays assessed the chances of the deal closing as “50/50,” to which Musk reportedly replied, “Agree with my understanding of the situation.” This correspondence appears to bolster the claim that Musk’s public statements were directly linked to a desire to reduce the purchase price. Wirtualna Polska provides further details on these exchanges.

Beyond the Tweet: Public Criticism and Data Disputes

Musk’s public criticism of Twitter extended beyond his tweets. During a conference in Miami, he publicly questioned the company’s data and regulatory filings, stating, “You can’t pay the same price for something that is much worse than they claimed.” When then-Twitter CEO Parag Agrawal defended the company’s bot data, Musk responded with an emoji of a pile of excrement. This behavior, the plaintiffs argue, was part of a pattern of deliberately disparaging Twitter to justify a lower valuation.

X Corp. And the Broader Musk Ecosystem

Since completing the acquisition in late 2022 for approximately $44 billion, Musk has dramatically reshaped the company, rebranding it as X and integrating it with his artificial intelligence startup, xAI and subsequently with his defense contractor, SpaceX. CNBC reports that Musk’s next potential move is to take SpaceX public in what is anticipated to be a record-breaking initial public offering (IPO). This ongoing evolution of X, and Musk’s broader business interests, adds another layer of complexity to the current legal proceedings. The integration of xAI is particularly noteworthy, as it signals a significant shift in X’s strategic direction towards artificial intelligence-driven features and services.

Investor Losses and the Class Action Lawsuit

The class action lawsuit was filed in October 2022 by investors who allege they suffered financial losses as a result of Musk’s actions. They claim that his public statements created a false and misleading impression of the deal’s prospects, leading to a decline in Twitter’s stock price. The investors are seeking damages to compensate for their losses, arguing that Musk prioritized his own financial interests over the interests of other shareholders. The outcome of the trial could set a precedent for future acquisitions and the responsibilities of acquiring parties regarding public statements and market impact.

The Broader Implications for Dealmaking

This case has broader implications for the landscape of large-scale acquisitions. It highlights the potential risks associated with public statements made by acquiring parties during the negotiation process. Musk’s willingness to publicly question the target company’s value and threaten to abandon the deal raises questions about the boundaries of acceptable behavior in such transactions. The Associated Press notes that the trial is being closely watched by legal experts and investors alike, as it could influence how future deals are structured and negotiated.

What’s Next

The trial is ongoing, and the jury will ultimately decide whether Musk engaged in civil securities fraud. Following closing arguments, the case will be submitted to the jury for deliberation. A verdict could take several days or weeks. Regardless of the outcome, the case is likely to have a lasting impact on the way acquisitions are approached and the level of scrutiny applied to public statements made by key players involved in such transactions. Further developments will likely include post-trial motions and potential appeals, extending the legal battle for months or even years.