Elon Musk was always going to struggle to win in Delaware. He had signed a binding agreement to buy Twitter for $44bn and to make his “reasonable best efforts” to complete the deal. Saying he didn’t want to buy it any more wasn’t going to work in Delaware, the state where Twitter is incorporated and one that carries a reputation for making sure agreed company transactions happen.
And so it appears that Musk has chosen the least bad option, which is going ahead with the deal before spending millions more dollars trying to convince a judge that he should be allowed to walk away even though he had no grounds to do so.
Twitter’s response to Musk’s formal offer to complete the deal is to the point: it intends to close the deal at $54.20 per share, as it always has done. It just won’t have to go to court to finalise the obvious – that Musk has to complete a deal he signed up to with minimal due diligence.
Brian Quinn, a professor at Boston College law school, says Musk was choosing the cleanest outcome. The discovery process, which is a pre-trial phase of a lawsuit where both parties disclose information and documents to each other, did not yield up any solid evidence that Twitter had suffered a “company material adverse effect”, which would substantially alter the value of the business and allow Musk to walk away.
“Certainly, the discovery process didn’t turn up any of the potential smoking guns that would have been necessary for him to win, so it was very unlikely that he would win on the merits,” says Quinn. “So, while not necessarily inevitable, this outcome is likely the best way to finish this cleanly.”
Quinn adds that if there is a “stay” in legal proceedings – as referred to in Musk’s letter – then Twitter could relaunch the process quickly if Musk wobbles again. Twitter has acknowledged Musk’s offer and said the company “intends to close the deal”, but it has not given any further details, suggesting that Musk’s behaviour in recent months has substantially eroded trust between both sides.
Against that backdrop, Musk appears to be on the verge of buying a business that he has displayed very little love for since agreeing to acquire it. Twitter’s former head of security, Peiter “Mudge” Zatko, portrayed a chaotically managed business in his whistleblower complaint against the company. Twitter strongly disputes Zatko’s allegations but they have put the company under pressure and it’s hard to see how Musk’s arrival as owner is going to lift morale.
“If Musk does take over the company, his number one mission must be to earn and retain the trust of Twitter’s employees,” says Mike Proulx, a research director at the analysis firm Forrester. “That’s no small task as he’ll be starting from a large trust deficit. Twitter’s future is bleak without an engaged employee base and there’s a lot of repair work to be done there.”
Musk’s plans for Twitter will now be scrutinised again. There were fears that Musk, a self-confessed free speech “absolutist”, will water down moderation guidelines at the platform. The discovery process has revealed a text from podcaster Joe Rogan to Musk that asks “Are you going to liberate Twitter from the censorship happy mob?”
Shortly after agreeing to buy Twitter, Musk sought to clarify his position on free speech, saying that he was “against censorship that goes far beyond the law”. The law on social media content is getting tougher in the UK thanks to the imminent online safety bill and in the European Union due to the Digital Services Act.
The UK government has said it wants to do more to protect freedom of expression and free speech in the bill, whose progress through parliament has been paused temporarily. Nonetheless, a change in the online regulatory environment for the UK and the EU will be Musk’s next legal reckoning after Delaware.
