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Why Elon Musk is Buying Twitter
If you’re wondering why Elon Musk is buying Twitter, there are a few reasons. One is the company’s refusal to turn over internal data. Another is Musk’s impulsiveness. Finally, he’ll try to exploit a standstill clause in the deal. All these factors may make Musk wiggle out of the deal, but these are not the only reasons he might try to back out.
Elon Musk’s attempt to restore free speech values by buying Twitter
The purchase of Twitter by billionaire Elon Musk is a controversial move. Many on the frontlines of online democracy question Musk’s seriousness and his ability to raise the cash to complete the purchase. Others question whether Musk’s move will actually bolster democracy. Both employees and experts have raised concerns that Musk will undo Twitter’s recent moves to protect marginalized users and tackle harassment.
This fight is not really about free speech. It is about political agenda. Many Americans are increasingly dependent on the wealth of billionaires and companies to fuel our political process. If Musk wants to protect free speech, he should refrain from letting Twitter become a breeding ground for falsehoods and hate speech. Ultimately, his actions are likely to subvert democracy. So, what should he do?
Musk’s refusal to turn over internal data
Twitter has been a victim of Elon Musk’s insistence on turning over internal data. The CEO has threatened to pull out of the $44 billion Twitter acquisition if Twitter refuses to provide the data he’s requested. Musk’s legal team argued that the data would be crucial to understanding the company’s revenue stream and business model. In addition, Musk’s lawyer argued that Twitter should provide the data.
The lawsuit against Twitter has prompted the company to take action. Musk has been asking for this information from the social media platform since May 9, 2022. In his lawsuit, he accuses the company of not disclosing its use of bots and breaching its duty to investors. In response, Twitter has removed its query cap and is currently analyzing whether the data it’s requesting will help the company improve its business model.
Musk’s impulsiveness
We’ve all seen Elon Musk’s impulsiveness before – he was on the verge of buying Twitter in April. In fact, he hinted at a potential wiggle room by declaring the deal “on hold” in May. Elon Musk cited issues with spam and fake accounts as the reason why he put the deal on hold. But that’s hardly the only reason for Musk’s impulsiveness.
The impulsiveness that led to the deal’s collapse isn’t new, but this time, it coincides with a big drop in the valuation of technology companies. Musk’s wealth is largely derived from Tesla, which has soared past 100 million followers. The company’s legions of fans and haters were predicting Elon’s impulsiveness in pursuing the Twitter deal. But the company insists its figures are accurate. It refuses to reveal the specific methods it uses to identify spam accounts. The company also says that it cannot give Musk private information. The data is used by Twitter to generate bot numbers.
The deal’s standstill clause
Historically, publicly traded companies require potential buyers to enter into standstill agreements before publicly bidding for a target company. Standstill agreements keep potential buyers from publicly bidding for a target company for a period of time, typically 12 to 18 months. In the Revlon case, a potential acquirer offered to make a higher offer, in violation of a standstill. Interestingly, the standstill was not enforced in that case, and the deal ultimately ended up in Perelman’s favor.
A standstill clause can also be used in the middle of a deal. Whether the deal is a sale or a merger, a standstill agreement can give each party an exclusive time period to continue negotiations. Including language like this in a letter of intent to purchase a company is a good way to demonstrate your good faith. Also, if you’re looking for a specific buyer, a standstill clause can make the process easier.
