Ahead Of Elon Musk's Lawsuit Agreeing To Continue Acquisition Of Twitter, Stocks Soared

Elon Musk finally agreed to continue Twitter's acquisition before the lawsuit hearing. (photo: twitter @tesla)

JAKARTA – Two weeks before the Twitter lawsuit was launched, Tesla CEO, Elon Musk, again proposed to continue his initial bid to acquire social media for 44 billion US dollars (Rp673 trillion). The offer marks the end of a legal battle that could force Musk to pay up to $1 billion in damages.

A deal would put the world's richest man in charge of one of the world's most influential media platforms. The deal could also end litigation that damaged the Twitter brand and put a stamp on Musk's reputation for erratic behavior.

Musk originally wanted to take over the company in April, but wanted to cancel it last July.

Twitter shares jumped 22.2% to close at $52.00 on Tuesday, while Tesla shares also rose 2.9% to $249.44 per share.

The news comes ahead of a much-anticipated fight between Musk and Twitter in Delaware's Court of Chancery on October 17, where the social media company will seek a court order directing Musk to close a $44 billion deal.

Musk sent a letter to Twitter on Monday, October 3 saying he intends to proceed with the deal on original terms if a Delaware judge goes ahead with the process. A source familiar with the Twitter team told Reuters that at a court hearing on Tuesday morning, the judge asked both parties to report back in the evening.

Musk's reasons are not clear

It was not immediately clear why Musk chose to abandon his fight against Twitter. He may worry about losing, and may face difficult questions during the trial. "He will be ousted and a lot of unpleasant facts will be revealed," said Eric Talley, a professor at Columbia Law School, citing the reason Musk went ahead with the Twitter acquisition.

Twitter received Musk's letter and intends to close the deal for the original price of $54.20. But Twitter did not say whether they accepted Musk's offer.

Musk, one of Twitter's most prominent users, said in July that he could leave without a penalty because the number of bot accounts was much higher than Twitter's estimate of just under 5% of users. Bots are automated accounts, and their use can lead to overestimation of how many humans are on the service. This data is important for determining advertising rates and the overall value of the service.

Twitter's legal team said on September 27 that documents obtained from two data scientists employed by Musk showed they estimated the number of fake accounts on the platform at 5.3% and 11%, respectively.

"None of these analyzes to the best of our knowledge support what Mr Musk said to Twitter and to the world in his termination letter," Twitter's attorney Bradley Wilson told the court.

"The original deal was a very seller-friendly agreement that would be very difficult to break," said Adam Badawi, a law professor at UC Berkeley.

A settlement between the two sides would reignite fears among Twitter users about Musk's plans for the platform, which have dispelled the voices of leading political conservatives. Donald Trump supporters hope Musk will reactivate the former US president's account, which was banned following the January 6, 2021, attacks on the US Capitol by his supporters.

Trigger Twitter Controversy

Musk has used Twitter to stir controversy, including last Monday when he floated a peace plan for the Ukraine-Russia war that drew swift criticism from Ukrainian President Volodymyr Zelenskiy.

The settlement at the original price would also allow Musk to finance the transaction without complications. If Musk and Twitter had renegotiated the price, it would technically allow committed backers to leave.

Musk has sold $15.4 billion worth of Tesla shares since he agreed to buy Twitter. He said he doesn't plan to sell more of his stake in Tesla, but some analysts expect he will sell his stake further to fund a deal with Twitter.

Musk has also secured financing commitments from banks - including Morgan Stanley, Bank of America Corp, Mitsubishi UFJ Financial Group Inc and Barclays Plc, to provide a $12.5 billion (IDR 191,2 trillion) loan to support the Twitter acquisition.

The banks that agree to finance the acquisition are likely to lose hundreds of millions of dollars in the deal as they will struggle to attract investors to buy the debt, given the downturn in the market since the deal was signed.

However, banks agreed to provide financing regardless of whether they could sell the loans and faced a long legal opportunity to break free from financing commitments, according to regulatory filings.

Since Twitter has already received shareholder support for the sale to Musk, the deal could close quickly in the coming weeks if both parties work out initial terms. In June, Twitter said the waiting period for antitrust permits had ended, suggesting the deal could go ahead.