The plot thickens...Twitter has entered no man’s land

August 15, 2022

Jayde Robertson

Elon Musk’s tortured $44 billion purchase agreement has inspired a certain level of chaos on the platform, with many tweets that discuss the drama has been sparked by none other than Twitter themselves. One of the most insightful was a cartoon that one of the company's own software engineers.

After spending 14 years at Google, Manu Cornet joined Twitter last year. While there, he utilized his hobby of cartooning to make fun of his employer's culture and controversies. His most recent three-panel illustration features an anthropomorphized rendition of the Twitter bird emblem speaking. It appears to be addressing Musk and states, "Your method is a model of deceit and poor faith." "You've ruined shareholder value, damaged my operations, and trashed me." The irate bird then changes to a beseeching tone, asking, "Will you now finally agree to adopt me?"

Cornet's cartoon captures the essence of the absurd predicament that has Twitter in its grip. Musk agreed to buy the business in April, but this month he stated he was backing out because the business had withheld data that would have allowed him to calculate the number of bots using the platform. Twitter responded with a lawsuit, claiming Musk had made misleading statements in a "hypocritical" manner that revealed he thought of the firm as "an elaborate joke" and should be required to buy out Twitter.

Only in the Elon Musk Twilight Zone does it make sense to demand your untrustworthy adversary become your boss. Twitter’s strategy may be creating more trouble than its worth for the company. After the insults thrown by both sides, things will be awkward if Twitter’s leaders succeed in forcing Musk to take over.

Twitter’s deal with Musk would not be the first to be complicated by interpersonal drama. Williams points to Disney’s purchase of Pixar, which stalled for years because of bad blood between Disney CEO Michael Eisner and Apple’s Steve Jobs, but went through in 2006 after Eisner was replaced by Bob Iger.

So - what are the possibilities?

The two possibilities, which are collectively far more likely, include Musk either purchasing Twitter for the agreed-upon $44 billion or walking away after striking a settlement in which he pays the business damages of between $5 billion and $10 billion. According to Ives, "the stock is pricing in some significant likelihood that Musk will ultimately be required to pay Twitter a major settlement far north of $1 billion, and maybe still be required to buy the company at the agreed-upon price."

Some workers and users are concerned about the possibility that Twitter's upside-down logic may succeed and Musk would wind up owning the social network he now seems to despise.

“There is no one to pump the brakes on this deal even when it’s clear Musk is the last thing in the world Twitter needs,” says Brianna Wu, a former video game developer and founder of progressive political action group Rebellion PAC. “The investors want it to go through. The board stands to make billions, and they’ll go to court to force the issue.”

According to Marcos Cuevas, Musk initially had to make an extremely high bid in order to be taken seriously as a buyer. He speculates that after seeing what the analysts thought of the price, he may have decided that he had overpaid. The widespread decline in the financial markets that occurred shortly after the purchase was closed would have made that emotion much more acute. According to Twitter's lawsuit, Musk's assertions regarding a bot problem were mostly influenced by it.

According to Marcos Cuevas, the leadership of Twitter has shifted from believing that the firm deserves a premium price to not believing that it can be sold at all. That about-face makes it worthwhile to attempt to pressure Musk into closing the purchase, getting the high price provided, or requiring the payment of substantial damages. According to Marcos Cuevas, "both sides have completely reframed their expectations, leading to a lack of trust and confidence, and a fundamental reconsideration of their initial stances."

What is this deal doing to Twitter?

In July, Twitter released poor second-quarter revenue figures, dealing yet another setback to a business already engaged in a public court spat with Elon Musk over the future of the social network. Revenue decreased by 1% in the quarter compared to the same period year on year, marking the first annual loss since the pandemic's peak in 2020. Sales for the quarter came to $1.18 billion, behind the $1.32 billion experts had predicted. The company attributed the unsatisfactory results to "headwinds in the advertising market relating to the macroenvironment as well as uncertainty related to the imminent acquisition of Twitter."

What’s next?

Both parties are getting ready for a trial that should take place in October and in which Twitter will urge a judge to order the CEO of Tesla Inc. to uphold his acquisition agreement to acquire the business for about $44 billion.

After Musk's announcement, Truist Securities analyst Youssef Squali noted that "this makes the investment case for Twitter impossible to build at this point." If the sale falls through, Truist predicted that the shares may price "in the high $20s."

What do we think?

While some part of us may be grateful for such an absurd distraction from the almost predictable state of the global newsroom - we’re not quite sure what to think about Musk’s end-game on this deal. Attention will now be drawn to what is basically just a failed commercial venture in light of all the issues in the world, including the conflict in Ukraine and the record-breaking heat wave in North America and Europe.

The fact that Twitter was granted an expedited trial sooner than Musk may have liked certainly doesn't seem to be a check in his win column.

Regardless of the outcome of the trial, change for Twitter is inevitable. The question is how significant. "The implications for Twitter are minimal. Yes, there are a few other immediate opinion and ham sandwich sites around, but they are so far behind all Twitter needs to do is manage itself well," said Bailey. "Twitter isn't 'the thing' anymore, and is a commodity that is a takeover target, especially because it's trading lower. But like Instagram's acquisition by Facebook, Twitter will always be a force."

Did he ever intend to buy Twitter? Was it part of a grand distraction? Does this seal the fate of the social giant?

Only time will tell.

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