One of Silicon Valley’s messiest deals — Elon Musk’s on-again, off-again, maybe-on-again deal to purchase Twitter — faces a crucial deadline this Friday.
That’s the day by which Musk must close his $44 billion purchase of Twitter or face a trial in Delaware Chancery Court that was delayed after the billionaire asked for time to finish the purchase, after first attempting to wriggle out of the deal. But so far, the purchase hasn’t happened, despite reports last week that Musk still planned to finalize it by the Friday deadline.
The stakes are high for Twitter. Musk’s offer works out to $54.20 per share, well above the $32.42 the stock was trading at in March, its low point for the year.
Musk, who has scoffed at various regulations (and has run afoul of the Securities and Exchange Commission, among other authorities) has quickly discovered that Kathaleen McCormick, the judge overseeing the Delaware case, is not inclined to offer the billionaire special treatment. She’s made clear that if the parties don’t close by the Friday deadline, her priority is settling the legal fight — quickly — with a November trial.
Here is Grid’s guide to the key players in the deal as the six-month-old saga hurtles toward a conclusion. (probably.)
- Elon Musk: The CEO of Tesla and founder of SpaceX is the richest man in the world — and a prolific Twitter user, with more than 100 million followers. Most of his wealth is tied up in Tesla stock, which he relied on for the bulk of his original offer in April before ultimately bringing on billions in financing from major banks and investors. Musk has floated the idea of allowing former president Donald Trump back onto Twitter if the deal goes through, and leaked documents revealed the billionaire’s plans to gut roughly three-quarters of the company’s 7,000-person workforce.
- Parag Agrawal: The Twitter CEO has only been in the job for about a year, taking over from co-founder Jack Dorsey after four years as the company’s chief technology officer. Agrawal, a longtime Dorsey confidante, stressed his knowledge of the company and deep relationship with the employees when he became CEO. But his tenure so far has been consumed by the company’s dealings with Musk.
- Kathaleen McCormick: The chancellor of the Delaware Court of Chancery is the presiding judge in the Twitter-Musk case. Known for her no-nonsense approach, McCormick has treated the case as a straightforward contract-law dispute. Musk, who has a history of flouting, extending and delaying legal conflicts, has seemingly met his match. Unless the two sides come to an agreement by Friday, a five-day trial overseen by McCormick will be the ultimate barometer of Musk’s claims.
- The banks: Morgan Stanley, Bank of America, Barclays and Mitsubishi Financial are among the heavy hitters that assembled roughly $13 billion in financing for Musk’s Twitter offer — but the deal may be far less attractive now amid the larger economic downturn and increases in inflation and Federal Reserve interest rates, and well, Musk being Musk. The Wall Street Journal reported that the banks involved in the deal plan to keep that debt on their balance sheets rather than selling it off at a potential $500 million loss. As banks are concerned about a potential recession, how they treat the debt could Influence Musk’s path forward with Twitter.
The wild cards
- Peiter Zatko: Twitter’s former head of security — a prolific ethical hacker known as “Mudge” — turned whistleblower in late August, alleging that Twitter failed to secure data and maintain user privacy and limit bots on the platform in a complaint to federal regulators. Attorneys for Musk and Twitter have wrangled over disclosure of documents related to Zatko and his claims in Delaware court. It’s not yet clear whether federal regulators will take any action related to Zatko’s whistleblower revelations.
- The Biden administration: The U.S. government is considering security reviews of Musk’s companies because of recent incidents in which he parachuted into the world of geopolitics — largely via Twitter. He has teased the idea of cutting off Starlink internet access to Ukraine, tweeted pro-Russian peace proposals, weighed in on the simmering tension between China and Taiwan and the dramatic exit of British Prime Minister Liz Truss. The Mudge disclosures also likely play into the government’s reasoning about how to proceed, including whether to step in and quash the deal entirely.
- Jack Dorsey: Twitter’s co-founder and former CEO had discussions with Musk about Twitter’s future on his way out the door. In text messages revealed as part of the court proceedings, Musk showed interest in Dorsey’s ideas and joined him in slamming Twitter’s board. Musk’s interest in Dorsey’s idea of an open-source protocol as the basis for Twitter (which Dorsey pursued in the form of Bluesky, Twitter’s yet-to-launch project) is something Musk will seemingly continue to pursue if he takes over the company.
The legal issues
- Specific performance: Musk waived due diligence before signing his contract in April to buy Twitter. That was a decision he seemed to quickly regret. In July, Musk declared that he would not go through with the deal, citing concerns about the number of bots on Twitter’s platform (more on that in a second). Twitter promptly filed suit in Delaware, seeking “specific performance” — a legal term that refers to enforcing a contract’s terms when no other remedy, such as a cash payment, is adequate.
- The bot battle: Musk’s legal arguments have centered around his claims that Twitter did not fully disclose the extent of its bot problem — what the billionaire and his lawyers have framed as a “clear material breach” that would justify breaking the contract. After a public back and forth that included Musk’s replying to an Agrawal tweet thread on the bot issue with a poop emoji, Musk tweeted the deal was “on hold.”
- The breakup fee: The contract includes a $1 billion “breakup fee” payable from Twitter to Musk if both parties decide to walk away from the deal or are unable to complete it. But most legal observers believe that McCormick would find that insufficient to make Twitter whole, given how its stock price and staff have responded to Musk’s barrage of criticism over the last half a year.
- If the deal goes through by Friday: The saga would, in theory, be over.
- If they miss the deadline: McCormick has said she would move to conduct a five-day trial in November. Cases in the Delaware Court of Chancery move quickly compared to other legal proceedings, resolving on average in 180 days. Verdicts on appeal are normally issued within days depending on the urgency of the issue. The bottom line: Don’t expect a drawn-out process akin to a criminal trial.
- If there’s an appeal: Appeals to chancery court verdicts are heard by the Delaware Supreme Court. That’s rare, however, given the specific expertise of the Delaware Court of Chancery when it comes to legal proceedings around corporate law.
Thanks to Alicia Benjamin for copy editing this article.