But by the early 2010s, it had grown into a global water cooler where millions of people went to make sense of the world around them. Its rapid-fire, 140-character bursts made it a valuable tool for those wanting to steer a conversation, attract attention to a cause or simply peer into the kaleidoscope of human thought.
On any given day, Twitter was the place to: talk about the news, complain about airline food, flirt with strangers, announce an earthquake, yell at your senator, cheer for your sports teams, post nudes, make dumb jokes, ruin your own reputation, ruin somebody else’s reputation, document police brutality, argue about anime, fall for a cryptocurrency scam, start a music career, procrastinate, follow the stock market, issue a public apology, share scientific papers, discuss “Game of Thrones,” find skillet chicken recipes.
And while it was never the biggest social media platform, or the most profitable, Twitter did seem to level the playing field in a way other apps didn’t.
But as Twitter and other social networks grew, powerful people found that these apps could help them extend their power in new ways. Authoritarians discovered they could use them to crack down on dissent. Extremists learned they could stir up hateful mobs to drive women and people of color offline. Celebrities and influencers realized that the crazier you acted, the more attention you got, and dialed up their behavior accordingly. A foundational belief of social media’s pioneers — that simply giving people the tools to express themselves would create a fairer and more connected society — began to look hopelessly naïve.
And when Donald J. Trump rode a wave of retweets to the White House in 2016, and used his Twitter account as president to spread conspiracy theories, wage culture wars, undermine public health and threaten nuclear war, the idea that the app was a gift to the downtrodden became even harder to argue.
Since 2016, Twitter has tried to clean up its mess, putting into effect new rules on misinformation and hate speech and barring some high-profile trolls. Those changes made the platform safer and less chaotic, but they also alienated users who were uncomfortable with how powerful Twitter itself had become.
These users chafed at the company’s content moderation decisions, like the one made to permanently suspend Mr. Trump’s account after the Jan. 6, 2021, insurrection. They accused the platform’s leaders of bowing to a censorious mob. And some users grew nostalgic for the messier, more freewheeling Twitter they’d loved.
Forget about the endless drama, the bots, the abrupt reversals, the spectacle, the alleged risk to the Republic and all we hold dear. Here is the most important thing about Elon Musk’s buying Twitter: The moguls have been unleashed.
In the old days, when a tech tycoon wanted to buy something big, he needed a company to do it. Steve Case used AOL to buy Time Warner. Jeff Bezos bought Whole Foods for Amazon. Mark Zuckerberg used Facebook to buy Instagram and WhatsApp and Oculus and on and on. These were corporate deals done for the bottom line, even if they might never have happened without a famous and forceful proprietor.
Mr. Musk’s $44 billion takeover of Twitter, which finally became a reality on Thursday, six months after he agreed to the deal, is different. It is an individual buying something for himself that 240 million people around the world use regularly. While he has other investors, Mr. Musk will have absolute control over the fate of the short-message social media platform.
It’s a difficult deal to evaluate even in an industry built on deals, because this one is so unusual. It came about whimsically, impulsively. But, even by the standards of Silicon Valley, where billions are casually offered for fledging operations — and even by the wallet of Mr. Musk, on most days the richest man in the world — $44 billion is quite a chunk of change.
the midterm elections’ most prominent campaign contributor, pumping tens of millions of dollars into right-wing congressional candidates. Two of his former employees are the Republican nominees for senator in Ohio and Arizona.
Elon Musk’s Acquisition of Twitter
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A blockbuster deal. In April, Elon Musk made an unsolicited bid worth $44 billion for the social media platform, saying he wanted to turn Twitter into a private company and allow people to speak more freely on the service. Here’s how the monthslong battle that followed played out:
A surprise move. On Oct. 4, Mr. Musk proposed a deal to acquire Twitter for $44 billion, the price he agreed to pay for the company in April. On Oct. 27, the purchase was completed. Mr. Musk quickly began cleaning house, with at least four top Twitter executives — including the chief executive and chief financial officer — getting fired.
Richard Walker, a professor emeritus of economic geography at the University of California, Berkeley and a historian of Silicon Valley, sees a shift in the locus of power.
“In this new Gilded Age, we’re being battered by billionaires rather than the corporations that were the face of the 20th century,” he said. “And the tech titans are leading the way.”
bought The Washington Post for $250 million. Marc Benioff of Salesforce owns Time magazine. Pierre Omidyar of eBay developed a homegrown media empire.
Deals have been a feature of Silicon Valley as long as there has been a Silicon Valley. Often they fail, especially when the acquisition was made for technology that either quickly grew outdated or never really worked at all. At least one venerable company, Hewlett-Packard, followed that strategy and has practically faded away.
$70 billion-plus acquisition of Activision Blizzard, which is pending, has garnered a fraction of the attention despite being No. 2.
said in April after sealing the deal. “I don’t care about the economics at all.”
He cared a little more when the subsequent plunge in the stock market meant that he was overpaying by a significant amount. Analysts estimated that Twitter was worth not $44 billion but $30 billion, or maybe even less. For a few months, Mr. Musk tried to get out of the deal.
This had the paradoxical effect of bringing the transaction down to earth for spectators. Who among us has not failed to do due diligence on a new venture — a job, a house, even a relationship — and then realized that it was going to cost so much more than we had thought? Mr. Musk’s buying Twitter, and then his refusal to buy Twitter, and then his being forced to buy Twitter after all — and everything playing out on Twitter — was weirdly relatable.
Inescapable, too. The apex, or perhaps the nadir, came this month when Mr. Musk introduced a perfume called Burnt Hair, described on its website as “the Essence of Repugnant Desire.”
“Please buy my perfume, so I can buy Twitter,” Mr. Musk tweeted on Oct. 12, garnering nearly 600,000 likes. This worked, apparently; the perfume is now marked “sold out” on its site. Did 30,000 people really pay $100 each for a bottle? Will this perfume actually be produced and sold? (It’s not supposed to be released until next year.) It’s hard to tell where the joke stops, which is perhaps the point.
“What was unique about Twitter was that no one actually controlled it,” said Richard Greenfield, a media analyst at LightShed Partners. “And now one person will own it in its entirety.”
He is relatively hopeful, however, that Mr. Musk will improve the site, somehow. That, in turn, will have its own consequences.
“If it turns into a massive home run,” Mr. Greenfield said, “you’ll see other billionaires try to do the same thing.”
Judge Kathaleen St. J. McCormick has become a very important person in the rambunctious life of Elon Musk.
The Delaware Chancery Court judge has given Mr. Musk until Friday to close his long-promised, $44 billion deal to acquire Twitter. If he doesn’t, Judge McCormick will preside over a trial in November that could end with Mr. Musk being forced to make good on the deal he made with Twitter in April.
The 43-year-old judge is also expected to preside over another case involving Mr. Musk in November. A Tesla shareholder accused him in a lawsuit of unjustly enriching himself with his compensation package while running the electric vehicle company, which is Mr. Musk’s main source of wealth. The package, which consisted entirely of a stock grant, is now worth around $50 billion based on Tesla’s share price.
Judge McCormick is also overseeing three other shareholder lawsuits against Mr. Musk, though it is not yet clear whether those will go to trial, too.
before it represented Mr. Musk. But, he said, “the deal will either close and then she will be a hero. Or not and Musk will look really bad.”
As a young girl, Judge McCormick played first base on the softball team and managed the high school football team. She has a long-held soft spot for the book “To Kill a Mockingbird,” about a Black man in small-town Alabama who was wrongfully accused of sexual assault.
unsolicited bid worth more than $40 billion for the social network, saying he wanted to make Twitter a private company and allow people to speak more freely on the service.
She then worked as a staff attorney with the Community Legal Aid Society, where she represented the needy and victims of domestic violence. She moved to a corporate law role at the firm Young Conaway Stargatt and Taylor in 2007, a mainstay in the Delaware legal circuit.
In 2018, she was nominated by John Carney, the governor of Delaware, to serve as vice chancellor on the state’s high court, the Delaware Chancery Court. In 2021, Gov. Carney nominated Ms. McCormick to become the first woman to lead the court.
More than 1.8 million businesses are incorporated in Delaware, including more than two thirds of Fortune 500 companies — and they all look to the court for guidance. When Twitter filed its lawsuit against Mr. Musk in July forcing him to close his acquisition, its case went to Delaware, where the company, like many others, is incorporated.
Judge McCormick, who has first dibs on any proceeding that comes before the court, chose herself of among a court of seven judges to oversee one of the most high profile corporate court battles in years.
At a hearing in September, as lawyers for Mr. Musk argued to delay the trial to take into account new claims from a whistle-blower, she poked at the billionaire’s decision to skip due diligence in his race to sign the deal in April. When Mr. Musk’s lawyer argued it would have been impossible to find out about the whistle-blower before the deal, she interjected, “We’ll never know, will we?” She added that “there was no due diligence.”
wrote in a ruling.
“She evidently was not putting up with any nonsense,” said Lawrence Hamermesh, a professor of law at Delaware Law School.
In October, after weeks of presiding over bruising back and forth arguments between the two sides, Judge McCormick granted Mr. Musk’s requests to put the trial on hold to give him more time to complete his financing for the acquisition. Judge McCormick granted him until Oct. 28 — a three-week delay.
“She had one eye on the clock,” said Brian Quinn, a professor at Boston College Law School, noting the two sides did not seem ready for a trial just two weeks away. “Another eye,” Mr. Quinn said, was “on potential appeals. She is looking forward saying, ‘Well, what if I ruled against Musk, and he appealed, and his appeal is that I pushed him — I rushed him toward the trial when he wanted to close the deal.’”
Judge McCormick is well-versed in trials involving deals with buyers that tried to walk away. As an associate at the law firm Young Conaway Stargatt and Taylor, she worked on cases involving deals that went awry when the stock market crashed in 2008. That included representing the chemical company Huntsman in 2008 when the private equity firm Apollo Global Management scuttled the deal it had struck to combine the chemical company with another it owned.
That deal, and others like it, paved the way for the kinds of contracts Twitter signed with Mr. Musk. Sellers learned how to prevent buyers from trying similar escape hatches. Companies increasingly structure deals with “specific performance” clauses allowing them to force a deal to close.
to follow through with its acquisition of a cake supplier after it argued that the pandemic had materially damaged the business by curbing demand for party cake.
Kohlberg contended it could not complete the deal because its debt financing had fallen apart. Judge McCormick did not buy that argument.
If Mr. Musk does not come through with Twitter’s money by Friday, that could ding his credibility in court, legal experts say. That could matter in November, when Judge McCormick is set to preside over a separate trial involving Mr. Musk and his compensation.
The case, filed in 2018, had originally been assigned to another judge on the Delaware Chancery Court, Joseph R. Slights III, before he retired in January. Judge McCormick picked up the case on Jan. 12, the same month Mr. Musk began to buy up shares of Twitter stock that ultimately led to his planned purchase of the company.
“It’s not ideal for him,” said Ann Lipton, a professor of corporate governance at Tulane Law School, of Mr. Musk’s multiple run-ins with Judge McCormick. “She’s uniquely low drama, which is the opposite of Musk. ”
Elon Musk proposed a deal with Twitter on Monday evening that could bring to an end the acrimonious legal fight between the billionaire and the social media company.
The arrangement would allow Mr. Musk to acquire Twitter at $54.20 per share, the price he agreed to pay for the company in April, two people familiar with the proposal who were not authorized to speak publicly said.
The potential deal comes after months of disputes that have created existential challenges for Twitter, cratering its share price, demoralizing its employees and spooking the advertisers it relies on for revenue.
A deal at the original price would be a victory for Twitter, which struck an agreement with Mr. Musk to buy the company for $44 billion. Mr. Musk declared in July that he no longer intended to complete the acquisition because he believed Twitter’s service was overrun by spam.
Twitter sued Mr. Musk in July to force the completion of the acquisition, and was set for a showdown with the billionaire this month in a Delaware courtroom. The company argued in legal filings that Mr. Musk’s reasons for abandoning the deal were smoke screens, and suggested that he had simply hoped for a lower price after stock market declines had decreased his overall wealth.
Mr. Musk said Twitter had most likely undercounted the amount of spam on its platform, making the company less valuable than he had initially believed. He also cited whistle-blower claims from a former Twitter executive, who said the company had misled regulators about its security practices, as a reason to exit the deal.
Mr. Musk submitted a proposal to Twitter on Monday evening, a person familiar with the conversation said. The parties met in court on Tuesday to discuss the proposal. The offer was reported earlier by Bloomberg.
A deal could allow both sides to avoid a messy public trial, which most likely would have featured testimony from Mr. Musk and senior Twitter executives.
This is a developing story. Check back for updates.
Jack Dorsey, a founder of Twitter, got a subpoena. So did Marc Andreessen, a prominent venture capitalist. Larry Ellison, Oracle’s chairman, and the investors David Sacks and Joe Lonsdale received them, too.
They were all summoned to share what they know about the rancorous, knock-down, drag-out tech spectacle of the year: the fight between Twitter and Elon Musk, the world’s richest man.
Mr. Musk enthusiastically agreed to buy Twitter in April for $44 billion, but has since tried to back out of the blockbuster deal, leading to lawsuits and recriminations. Both sides are set for a showdown in Delaware Chancery Court in October over whether Mr. Musk needs to stick with the acquisition. The torrent of legal demands in the case has forced a who’s who of Silicon Valley to now lawyer up, creating a heyday for top-tier law firms.
unsolicited bid worth more than $40 billion for the social network, saying he wanted to make Twitter a private company and allow people to speak more freely on the service.
Of the two sides, Twitter has so far been more aggressive in the discovery process for the case. The company has issued more than 84 subpoenas to uncover discussions that might prove that Mr. Musk soured on the acquisition because the economic downturn decreased his personal wealth. (Mr. Musk’s net worth still stands at $259 billion, according to Bloomberg.)
Twitter has sent subpoenas to Mr. Musk’s friends and associates, such as the former SpaceX board member Antonio Gracias and the entertainment executive Kristina Salen, to get insight into their group chats. The company has also summoned investors like Mr. Andreessen and Mr. Ellison, who agreed to pony up money so Mr. Musk could do the deal.
Mr. Musk himself has agreed to sift through every text he sent or received between Jan. 1 and July 8 for messages relevant to Twitter. His side’s subpoena total stands at more than 36 — including one to Mr. Dorsey — as Mr. Musk tries to show that Twitter lied about the number of inauthentic accounts on its platform, which he has cited as a reason to pull out of the deal.
Mr. Musk has demanded voluminous data from Twitter, including correspondence among its board members and years of account information. Last Thursday, the court granted Mr. Musk a limited set of 9,000 accounts that Twitter audited to determine how many bots were on the platform during a particular quarter. He has also subpoenaed the company’s bankers, Goldman Sachs and J.P. Morgan.
But Mr. Musk has also shown his unhappiness over Twitter’s attempts to obtain his group chats. This month, his lawyers tried limiting the company’s inquiries, saying they did not plan to turn over messages from “friends and acquaintances with whom Mr. Musk may have had passing exchanges regarding Twitter.”
Mr. Sacks, another friend of Mr. Musk’s who worked with him at PayPal, responded to a subpoena from Twitter with a tweet that included an image of a Mad magazine cover featuring a giant middle finger.
In a court filing on Friday, Mr. Sacks’s lawyers, who filed a motion to quash the subpoenas, said he had produced 90 documents for Twitter so far. They accused the company of “harassing” Mr. Sacks and creating “significant” legal bills for him by subpoenaing him in California and Delaware.
A lawyer for Mr. Sacks did not respond to a request for comment.
Kathaleen McCormick, the judge overseeing the case, has largely waved off Mr. Musk’s objections about the subpoenas to his friends. Mr. Musk’s conduct in discovery “has been suboptimal,” and his requests for years of data were “absurdly broad” she wrote in rulings last week.
“Defendants cannot refuse to respond to a discovery request because they have unilaterally deemed the request irrelevant,” Ms. McCormick wrote. “Even assuming that Musk has many friends and family members, Defendants’ breadth, burden, and proportionality arguments ring hollow.”
Ed Zimmerman, a lawyer who represents start-ups and venture capitalists, said it wasn’t surprising that Silicon Valley techies appeared unwilling to be drawn into the case. The venture industry has long operated with little regulatory oversight. Investors have only begrudgingly become more accustomed to legal processes as their industry has fallen under more scrutiny, he said.
“Venture for so long has been very accustomed to being an outsider thing,” he said. “We didn’t have to focus on following all the rules, and there wasn’t that much litigation.”
For law firms, Mr. Musk’s battle with Twitter has become a bonanza — especially financially.
“I’m sure they’re all hiring fancy high-end law firms,” Mr. Melkonian said. “Those guys are going to charge thousands of dollars per hour for preparation.”
That’s if you can find a lawyer at all. Between Mr. Musk and Twitter, they have sewn up a passel of top law firms.
Twitter has hired five law firms with expertise in corporate disputes and Delaware law: Wachtell, Lipton, Rosen & Katz; Potter Anderson & Corroon; Ballard Spahr; Kobre & Kim; and Wilson Sonsini Goodrich & Rosati. Mr. Musk has retained a team of four firms: Skadden, Arps, Slate, Meagher & Flom; Quinn Emanuel Urquhart & Sullivan; Chipman Brown Cicero & Cole; and Sheppard Mullin.
Other leading tech law firms — including Freshfields Bruckhaus Deringer, Perkins Coie, Baker McKenzie, and Fenwick & West — declined to comment, citing conflicts in the case.
Lawyers sitting on the sidelines probably feel left out, Mr. Zimmerman said. “If I were a trial lawyer in San Francisco, with a specialty of dealing with venture funds and the growth companies they invest in, there ought to be that FOMO,” he said, referring to the shorthand for the “fear of missing out.”
For those who have been tapped, the next several months are likely to be chaotic.
“For people who do this work, this is what we live for,” said Karen Dunn, a litigator for tech companies who has represented Apple and Uber, and who is not involved in the Twitter case. “It moves incredibly fast, it is all consuming.”
Still, Mr. Musk’s threat of walking away could bring Twitter back to the negotiating table, allowing the billionaire to buy the company at a discount. The two sides could also settle with Mr. Musk paying damages to Twitter. Or he could pay a $1 billion breakup fee and walk away, an option allowed only under certain circumstances, such as if Mr. Musk’s financing fell through.
If Mr. Musk successfully disentangles himself from Twitter, it could be disastrous for the company. Its stock has fallen more than 35 percent below his offer of $54.20 per share. Twitter’s business has also deteriorated in recent months. In May, Mr. Agrawal said in a memo to employees that the company had not lived up to its business and financial goals.
Now that Twitter has sued, Mr. Musk and his lawyers are expected to respond. While the timeline beyond then depends on many factors, the company and Mr. Musk will most likely be called to a hearing in Delaware and go through the discovery process, with the two sides digging up facts they believe are relevant to the case.
The case may then move to a trial, though there is a chance the judge assigned to the case will dismiss Mr. Musk’s efforts to walk away. If the suit proceeds to trial, the judge will decide whether Twitter’s disclosures were insufficient and constituted a material harm to the deal.
In the past, Delaware’s Chancery Court has prevented companies from trying to walk away from deals. In 2001, for example, when Tyson Foods tried to back out of an acquisition of the meatpacker IBP, the court ruled that Tyson had to follow through with the agreement. In situations where the court has allowed buyers to exit, it has required them to pay damages. By most readings of Twitter’s contract with Mr. Musk, damages would be capped at $1 billion.
Twitter and Mr. Musk have assembled legal teams to duke it out. Leading Twitter’s efforts in Delaware is William Savitt, a lawyer at Wachtell, Lipton, Rosen & Katz. Wachtell Lipton is famous for, among other things, developing legal tactics to protect companies from hostile buyers, like the so-called poison pill that Twitter originally put in place to defend itself against Mr. Musk.
SAN FRANCISCO — For years, Twitter was a runner-up social media company. It never grew to the size and scale of a Facebook or an Instagram. It simply muddled along.
Then, Elon Musk, a power user of the service, stormed in. He offered $44 billion to buy Twitter and declared that the company could perform far better if he were in charge. He disparaged Twitter’s executives, ridiculed its content policies, complained about the product and confused its more than 7,000 employees with his pronouncements. As Mr. Musk revealed the company’s lack of business and financial prospects, Twitter’s stock plunged more than 30 percent.
Now, as Mr. Musk, a billionaire, tries to back out of the blockbuster deal, he is inexorably leaving Twitter worse off than it was when he said he would buy it. With each needling tweet and public taunt, Mr. Musk has eroded trust in the social media company, walloped employee morale, spooked potential advertisers, emphasized its financial difficulties and spread misinformation about how Twitter operates.
set to sue Mr. Musk as soon as this week to force a completion of the deal. The court battle is likely to be protracted and immense, involving months of expensive litigation and high-stakes negotiations by elite lawyers. A resolution is far from certain — Twitter might win, but, if it loses, Mr. Musk could walk away by paying a breakup fee. Or the two sides could renegotiate or settle.
On Monday, the damage that Mr. Musk, 51, has inflicted was evident. Twitter’s stock plunged more than 11 percent to one of its lowest points since 2020 as investors anticipated the coming legal battle. Since Twitter accepted Mr. Musk’s acquisition offer, on April 25, its stock has lost over a third of its valueas investors have grown increasingly skeptical that the deal would get done on the agreed terms. (In contrast, the tech-heavy Nasdaq index was down about 12.5 percent in the same period.)
Twitter declined to comment on Monday. In a letter to Mr. Musk’s lawyers on Sunday, the company’s lawyers said that his move to terminate the deal was “invalid and wrongful” and that Mr. Musk “knowingly, intentionally, willfully and materially breached” his agreement to buy the firm. Twitter would continue to provide information to Mr. Musk and to work to close the transaction, the letter added.
cited the number of fake accounts on Twitter’s platform as the reason that he cannot buy the company, tweeted a picture of himself laughing at the situation.
the best it could obtain, suggesting it saw no way to reach that price on its own.
Parag Agrawal, Twitter’s chief executive, said in a memo to employees in May that the company had not lived up to its business and financial goals. To address the issues, he pushed out the heads of product and revenue, instituted a hiring slowdown and began an effort to attract new users and diversify into e-commerce. In April, the company stopped providing a forward-looking financial outlook to investors, pending the acquisition.
That trajectory is unlikely to change as uncertainty over the deal discomfits advertisers, the main source of Twitter’s revenue.
“Twitter will have trouble in the near future reassuring skittish advertisers and their users that they’re going to be stable,” said Angelo Carusone, the president of the watchdog group Media Matters for America.
In what was an implicit dig at Twitter’s top executives, Mr. Musk said he could have done way better with the company. In a presentation to investors in May, he said he planned to quintuple the company’s revenue to $26.4 billion by 2028 and to reach 931 million users that same year, up from 217 million at the end of last year.
letter filed to the Securities and Exchange Commission on Friday. The company’s “declining business prospects and financial outlook” had given him pause, his lawyers wrote, especially considering Twitter’s recent “financial performance and revised outlook” on the fiscal year ahead.
Mr. Musk, who has more than 100 million followers on Twitter, has also jackhammered the product, saying it is not as attractive as other apps. He has repeatedly claimed, without evidence, that Twitter is overrun with more inauthentic accounts than it has disclosed; such accounts can be automated to pump out toxic or false content. (The company has said fewer than 5 percent of the accounts on its platform are fake.)
His barbs about fake accounts have weakened trust in Twitter, just as the company prepares to moderate heated political discussions about an upcoming election in Brazil and the midterm elections this fall in the United States, misinformation experts said.
In another criticism of Twitter and the way it supervises content, Mr. Musk vowed to unwind the company’s moderation policies in the name of free speech. In May, he said he would “reverse the permanent ban” of former President Donald J. Trump from Twitter, allowing Mr. Trump back on the social network. That riled up right-wing users, who have long accused the company of censoring them, and renewed questions about how Twitter should handle debates over the limits of free speech.
Inside the company, employee morale has been battered, leading to infighting and attrition, according to six current and former employees.
Some of those who remain said they were relieved that Mr. Musk seemed to have decided against owning the company. Others shared nihilistic memes on the company’s Slack or openly criticized Twitter’s board and executives for entertaining Mr. Musk’s offer in the first place, according to internal messages viewed by The New York Times. The mood among executives was one of grim determination, two people with knowledge of their thinking said.
illustrated the mood with a cartoon that showed a shattered company that had been bumped off a shelf by Mr. Musk’s careless elbow. His caption: “You break it, you buy it!”
Ryan Mac and Isabella Simonetti contributed reporting.
Now that Elon Musk has signaled his intent to walk away from his $44 billion offer to buy Twitter, the fate of the influential social media network will be determined by what may be an epic court battle, involving months of expensive litigation and high-stakes negotiations by elite lawyers on both sides.
The question is whether Mr. Musk will be legally compelled to stick with his agreed-upon acquisition or be allowed to back out, possibly by paying a 10-figure penalty.
Most legal experts say Twitter has the upper hand, in part because Mr. Musk attached few strings to his agreement to buy the company, and the company is determined to force the deal through.
inauthentic accounts. He also said that Mr. Musk did not believe the metrics that Twitter has publicly disclosed about how many of its users were fake.
Twitter’s board responded by saying it intended to consummate the acquisition and would sue Mr. Musk in a Delaware chancery court to force him to do so.
At the heart of the dispute are the terms of the merger agreement that Mr. Musk reached with Twitter in April. His contract with Twitter allows him to break off his deal by paying a $1 billion fee, but only under specific circumstances such as losing debt financing. The agreement also requires Twitter to provide data that Mr. Musk may require to complete the transaction.
Mr. Musk has demanded that Twitter give a detailed accounting of the spam on its platform. Throughout June, lawyers for Mr. Musk and Twitter have wrangled over how much data to share to satisfy Mr. Musk’s inquiries.
as they face advertising pressure, global economic upheaval and rising inflation. Twitter’s stock has fallen about 30 percent since the deal was announced, and trades well under the Mr. Musk’s offering price of $54.20 a share.
Legal experts said Mr. Musk’s dispute over spam could be a ploy to force Twitter back to the bargaining table in hopes of securing a lower price.
During the deal-making, no other potential buyer emerged as a white knight alternative to Mr. Musk, making his offer the best that Twitter is likely to get.
Twitter’s trump card is a “specific performance clause” that gives the company the right to sue Mr. Musk and force him to complete or pay for the deal, so long as the debt financing he has corralled remains intact. Forced acquisitions have happened before: In 2001, Tyson Foods tried to back out of an acquisition of the meatpacker IBP, pointing to IBP’s financial troubles and accounting irregularities. A Delaware court vice chancellor ruled that Tyson had to complete the acquisition,
attempted to break up its $16 billion deal to acquire Tiffany & Company, ultimately securing a discount of about $420 million.
“This stuff is a bargaining move in an economic transaction,” said Charles Elson, a recently retired professor of corporate governance at the University of Delaware. “It’s all about money.”
A lower price would benefit Mr. Musk and his financial backers, especially as Twitter faces financial headwinds. But Twitter has made clear it wants to force Mr. Musk to stick to his $44 billion offer.
The most damaging outcome for Twitter would be for the deal to collapse. Mr. Musk would need to show that Twitter materially and intentionally breached the terms of its contract, a high bar that acquirers have rarely met. Mr. Musk has claimed that Twitter is withholding information necessary for him to close the deal. He has also argued that Twitter misreported its spam figures, and the misleading statistics concealed a serious problem with Twitter’s business.
A buyer has only once successfully argued in a Delaware court that a material change in the target company’s business gives it the ability to cleanly exit the deal. That occurred in 2017 in the $3.7 billion acquisition of the pharmaceutical company Akorn by the health care company Fresenius Kabi. After Fresenius signed the agreement, Akorn’s earnings fell and it faced allegations by a whistle-blower of skirting regulatory requirements.
Even if Twitter shows that it did not violate the merger agreement, a chancellor in the Delaware court may still allow Mr. Musk to pay damages and walk away, as in the case of Apollo Global Management’s deal combining the chemical companies Huntsman and Hexion in 2008. (The lawsuits concluded in a broken deal and a $1 billion settlement.)
habit of flouting legal confines.
revealed in May that it was examining Mr. Musk’s purchases of Twitter stock and whether he properly disclosed his stake and his intentions for the social media company. In 2018, the regulator secured a $40 million settlement from Mr. Musk and Tesla over charges that his tweet falsely claiming he had secured funding to take Tesla private amounted to securities fraud.
“At the end of the day, a merger agreement is just a piece of paper. And a piece of paper can give you a lawsuit if your buyer gets cold feet,” said Ronald Barusch, a retired mergers and acquisitions lawyer who worked for Skadden Arps before it represented Mr. Musk. “A lawsuit doesn’t give you a deal. It generally gives you a protracted headache. And a damaged company.”
Owning Twitter is tricky because the platform faces regulatory scrutiny and is embroiled in a debate over free speech online. Its business has also faced difficulties, especially in a competitive market for digital advertising. After Mr. Musk struck the acquisition agreement, Twitter reported 16 percent growth in revenue for the first quarter, below the 20 percent it had predicted.
Within weeks, Mr. Musk tweeted that the deal was on hold, saying he wanted more details about the volume of spam and fake accounts. At one point, he said striking a deal for Twitter at a lower price was “not out of the question.” He also responded to tweets from Parag Agrawal, Twitter’s chief executive, who posted details of how the company detects and fights spam, with a poop emoji.
Behind the scenes, Twitter continued giving Mr. Musk and his team access to information about its platform, people with knowledge of the situation have said. Last month, the company agreed to allow Mr. Musk direct access to its “firehose,” the daily stream of millions of tweets that flow through the company’s network. Twitter, which has said roughly 5 percent of its accounts are spam since it went public in 2013, has also said the number is an estimate.
Even so, the number of fake accounts remained a concern for Mr. Musk. For years before proposing the acquisition, he complained about spam on Twitter and said the company should do more to authenticate its users. In 2020, he appeared at a Twitter employee event and said the company should do more to prevent spam.
Last month, in a six-paragraph letter, Mr. Musk’s lawyers demanded more information from Twitter about its methods for counting fake accounts and claimed the firm was “actively resisting and thwarting” his rights. The company was “refusing Mr. Musk’s data requests” to disclose the number of fake accounts on its platform, they said. That amounted to a “clear material breach” of the deal, the lawyers continued, saying it gave Mr. Musk the right to break off the agreement.
Twitter said on Thursday that it had heightened efforts to detect and block spam after Russia used fake accounts to influence the 2016 U.S. presidential election. The company has added new requirements to its sign-up process and said it used human auditors to vet its tally of spam accounts. It also said it removed one million spam accounts each day, and locked millions more per week until the operators of the accounts passed anti-spam tests.
While those compensation totals are taken from the company’s financial filings, they are often estimates driven by the companies’ attempts to value the stock their chief executives might receive. As a result, the executives may earn less than those totals, especially if the bear market persists and their companies’ stock prices remain depressed, but they could also take home far higher amounts should the stocks recover.
Many of the highest-ranking executives in the survey received pay packages that were far larger than those of the heads of far bigger companies with much larger profits. For example, Tim Cook, chief executive of Apple, received his first equity award since 2011 last year and had total compensation of $99 million, putting him just 13th in the survey.
Despite the growth in pay, shareholders, apparently believing that it is being tied to performance, have voted in favor of most packages. Only 3 percent of “say on pay” votes got less than 50 percent support from shareholders in the year through June 3, according to an analysis of 1,444 public companies by Willis Towers Watson, a consulting firm that advises companies on executive pay programs and corporate governance matters.
For several years, public companies have had to compare their chief executive’s compensation with that of a typical employee, the result of a regulation passed by Congress that aimed to help investors assess the level of executive pay. Last year, chief executives earned 339 times more than the median pay of employees at their companies, up from 311 times in 2020, according to Equilar. The median employee wage rose 10 percent last year, to $92,349 from $83,808.
Last year’s executive pay jumped in part because corporate boards, which decide chief executive compensation, wanted to reward top officers for navigating their companies through the pandemic.
In addition, the stock market rallied in 2021, and the value of stock grants, which typically constitute the largest share of chief executive compensation, was also higher. When stock prices are rising, boards tend to say executives are doing a good job — and pay them more.