Why Elon Musk Got Cold Feet About That Twitter Deal

After offering to buy Twitter for $44 billion earlier this year, world’s richest man Elon Musk no longer wants to close the deal and is using the issue of bots on the platform as a way to get out of it. Musk is citing material breach as the reason he should be released from the deal. He's saying there has been obfuscation and an absence of data from Twitter around the number of fake users or bots on the platform. Twitter claims that around 5% of its total users are bots, while Musk has said that this number is actually more likely to be above 20%. This complaint from Musk doesn’t really pass the smell test. After all, Musk has been highly vocal about the problem of bots on Twitter for a really long time. In fact, right at the beginning of what became a contentious bid to buy the platform, he made it his mission to get rid of fake accounts: "If our Twitter bid succeeds, we will defeat the spam bots or die trying!" he tweeted in April. Twitter Under Musk: Friend of Free Speech or Agent of Chaos? It’s notable that his desire to exit the deal comes after drops in share prices for both Twitter and his electric car company, Tesla. The latter has impacted Musk’s personal wealth to the tune of around $65 billion. It is possible that Musk no longer feels that Twitter represents a good investment for his money given these headwinds. Plus, bots represent a threat to Twitter’s revenue-generating capabilities. The platform's primary revenue driver is advertising and, while not all bots are harmful or malicious, Musk is buying Twitter’s users and their propensity to respond to advertising. A bot can’t sign up for an insurance policy or buy a swimsuit. Bots, therefore, dilute the quality of Twitter’s audience for advertisers. There are two options for why Elon Musk wants out of this deal. Maybe we take him at his word that the number of bots on the platform is too high. This means that Musk is far more focused on Twitter’s capacity to make money than he was transparent about when the deal was going through. This is when his priorities originally seemed rather high-minded, when he said, “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.” Do the bots really change that ambition? Probably not. Do they impact the revenue-driving opportunities for the business? 100%. The second option is that maybe buying Twitter seemed like a good idea at the time. $44 billion is an awful lot of money to spend on something that might not yield the rewards he was hoping for. But it’s not going to be easy for Musk to get out of it. The Twitter deal has a breakup clause: According to the contract, Musk is liable for a $1 billion fee if the deal does not go through. However, Twitter is now taking him to court to force through the deal in its entirety, meaning Musk would have to buy the company for the agreed-upon $44 billion. Twitter is understandably incensed by the position in which they now find themselves and are geared up for a fight. In court filings, Twitter has said, "Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests ... Musk apparently believes that he … is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away." Ouch! The trial is likely to begin in September. It has become a very toxic situation between Musk and Twitter, and it seems inconceivable that, after all this disparagement on both sides, a happy marriage could ever take place. Whatever the Delaware Chancery court decides, this is unlikely to be the end of Musk’s interest in Twitter. But the shape of his involvement is yet to be determined, and the impact on Twitter as a business is yet to be seen. So far, Twitter has been through a highly destabilizing period of weathering Musk’s interest in its business, and how advertisers will feel in either a Musk-free or Musk-led future is uncertain. Twitter’s Lawyers Fire Off Defiant Reply to Elon Musk’s About-Face

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Why Elon Musk Got Cold Feet About That Twitter Deal

Musk is no longer touting free speech vows—he's masking buyer's remorse with bot issues

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Jenny Kirby

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