Twitter investors sued the Tesla owner Elon Musk over the issue of delay in disclosing the company stake he owned. The complaint was filed on Wednesday in California Federal Court. It was also mentioned that Elon Musk saved himself around $156 million by choosing not to disclose the deal.
How did this all start?
On December 21, 2017, Elon Musk made a simple tweet stating “I love Twitter” to which someone replied “You should buy it” leading to Elon’s tweeting “How much is it?” The original tweet even got 1.74 likes and 35,000+ retweets.
After 5 years the topic started again after the rumors of Elon Musk building a new social media company and many suggested why not take over Twitter. “He does have the money to afford so why did not” such tweets and discussions over social media lead to Elon Musk’s offer of $44 Billion to buy it.
What was the initial scenario and how did it get complicated?
Even before putting this offer on the table Elon bought a 9.2% stake and became the second-biggest shareholder of Twitter. The shareholders offered Elon the position to become a board member by offering a board seat but Elon declined it. The reason behind declining this deal was that if he accepted the board seat he won’t be able to take over the company (according to the company rules).
On March 14th Elon Musk officially surpassed the 5% ownership of the company and according to SEC rules he was supposed to inform about this within the 10 days and he didn’t. With this tactic, he saved more than $143 million as said by Daniel Taylor (An accounting professor for the University of Pennsylvania).
Not only that he added $6.25 billion of equity at a very low price to the original personal funding of $27.3 billion. This will result in reducing the amount of debt on that $44 billion bid. Originally $12.5 billion of the loan was taken by Elon Musk after putting the stakes of his electric car but he put in some co-investors which saved him around $6.25 billion.
Why hasn’t Elon Musk already bought Twitter?
The 44 Billion deal wasn’t complete because Elon Musk wanted to get all the personal data of users to know to confirm the percentage of bots present on the platform. And the company wasn’t all in favor of that earlier after the discussion of buying Twitter. Elon presented his thought about removing all the bots from the platform. According to the stats shown by twitter there are only 5% of bots out of total users and no special measures are needed to get that clear. Elon proposed authenticating all humans on the platform to get rid of the bots but this will create difficulty for the marginalized people to speak their minds.
The board of directors of Twitter initially opted to implement a “poison pill” that would limit Musk’s ability to increase his interest in the firm, but then unanimously agreed to accept his buyout bid.
Last words
Musk agreed to buy Twitter for $54.20 per share in April. However, Tesla CEO Elon Musk stated in May that the agreement cannot move through until the platform verifies that less than 5% of its users are false or spam accounts. After this tweet, an assumption was made that maybe Elon didn’t want to proceed with the deal and used this situation as an excuse to get out of it. But recently it got cleared that this was probably a tactic of Elon to lower the stock value and buy the stocks at a really low price. This situation led to building a case against Elon Musk by the Twitter investors.
Also Read: Central bank head bashes crypto after Terra USD and LUNA crash
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. All content provided is for informational purposes only, and shall not be relied upon as financial/investment advice. Opinions shared, if any, are only shared for information and education purposes. Although the best efforts have been made to ensure all information is accurate and up to date, occasionally unintended errors or misprints may occur. We recommend you to please do your own research or consult an expert before making any investment decision. You may write to us at [email protected].
