Elon Musk-Twitter deal finalized after months of legal drama

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Elon Musk completed his purchase of Twitter after a six-month acquisition process marked by legal animosity and concerns over the implications for Free Speech on the platform. Months of back-and-forth drama persisted, including Musk vowing to pull out of the $44 billion deal, and Twitter vowing legal action if he refused to abide by the initial agreement. 

Key Players

Twitter is an American microblogging and social networking service on which users post and interact via “tweets.” As of 2022, Twitter had nearly 400 million users worldwide. Over the years, the platform has received degrees of backlash from all parts of the political spectrum, including accusations of censorship and spreading disinformation. 

Elon Musk, a South African-American entrepreneur and investor, became the CEO and owner of Twitter in October 2022. He is also the founder and CEO of SpaceX, a space manufacturer, and Tesla, an electric vehicle company. As of June 2022, he was considered the wealthiest person in the world, with an estimated net worth of $211 billion. 

Further Details

Over the years, various political factions have condemned Twitter for their own reasons. While many on the right have accused the platform of silencing conservative voices, those on the left have implored Twitter to be more rigorous in curbing disinformation, especially around COVID-19 and false claims of fraud in the 2020 U.S. presidential election that fueled the Jan. 6, 2021, Capitol insurrection. 

In July 2021, former President Donald Trump attempted to take legal action against Twitter and other social media giants, alleging conservatives were being censored. In May 2022, Trump’s Twitter lawsuit was dismissed by U.S. District Court Judge James Donato for the Northern District of California, who had been nominated by former President Barack Obama. 

On April 25, 2022, Musk and Twitter agreed to a $44 billion deal for the sale of the social media platform. The deal was struck after Musk’s slow buy-up of shares, rising from a 5% stake in the company in March to a 9.2% stake nearly a month later, which made him the largest individual shareholder, according to BusinessToday. 

Musk said he wanted to buy Twitter to protect Free Speech, allowing users to control what they see and post on the platform. ​​“Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated,” he stated, adding that it was his goal to enhance Twitter and eliminate spam bots. 

“Twitter has tremendous potential — I look forward to working with the company and the community of users to unlock it,” Musk continued. 

Reactions were polarized. While some championed Musk as a Free Speech leader, others questioned his motives, speculating whether he would adhere to Twitter’s community standards and guidelines regarding hate speech and disinformation, as well as national security. 

Jack Dorsey, co-founder and former CEO of Twitter, tweeted that while he believed Twitter should act as a “public good at a protocol level” as a company, Musk was “the singular solution I trust. I trust his mission to extend the light of consciousness.”

However, Jeff Bezos, founder and former CEO of Amazon, implied that China, where censorship is widespread and severe, could influence Musk’s control of Twitter, as Tesla’s second largest market is in China. “Did the Chinese government just gain a bit of leverage over the town square?” Bezos tweeted. 

Criticism also came from the entertainment industry. “Was there nothing better to do with 44 billion dollars?” Marvel actor Simu Lee of “Shang-Chi and the Legend of the Ten Rings” tweeted.

“The Good Place” actress Jameela Jamil tweeted, “I fear this free speech bid is going to help this hell platform reach its final form of totally lawless hate, bigotry, and misogyny. Best of luck.” She announced she was leaving the platform.

Promptly after the deal, the European Union (EU) and the United Kingdom warned that Musk’s Twitter would still be beholden to regulation surrounding disinformation or would otherwise be the target of sanctions ranging from fines to a total ban, according to The Guardian.

“Twitter and all social media platforms must protect their users from harm on their sites. We are introducing new online safety laws to safeguard children, prevent abusive behavior and protect free speech. All tech firms with users in the UK will need to comply with the new laws or face hefty fines and having their sites blocked,” a U.K. government spokesperson said. 

With Musk promising to maximize Free Speech as the owner of Twitter, many speculated as to what lengths he would go and whether he would comply with laws like the Digital Services Act (DSA), an EU policy proposal that would require more regulation from tech giants to protect users in EU member states from hate speech, disinformation, and other forms of harmful content.

On April 26, 2022, Thierry Breton, the EU internal market commissioner, tweeted that Musk would have to comply with the DSA. “Be it cars or social media, any company operating in Europe needs to comply with our rules – regardless of their shareholding. Mr Musk knows this well. He is familiar with European rules on automotive, and will quickly adapt to the Digital Services Act,” Breton tweeted.

Musk later clarified that by protecting Free Speech, “I simply mean that which matches the law,” but further emphasized he was “against censorship that goes far beyond the law.”

On May 9, appearing in a video alongside Breton, Musk said the DSA was “exactly aligned” with his future goals for Twitter, adding that he would want his companies to do “anything … that would be beneficial to Europe.” In a reply to the video, Musk added that he and Breton were “on the same page.” 

But on May 17, Musk tweeted that the deal could “not move forward” without more information about the volume of spam and fake accounts on Twitter. 

In the past, Twitter has said regulatory filings indicated that fewer than 5% of its accounts are fake. But Musk asserted that the number realistically might be 20% and demanded to see evidence proving otherwise. “My offer was based on Twitter’s SEC filings being accurate,” Musk noted in his tweet. 

According to The New York Times, a few hours later, Twitter said it was “committed to completing the transaction on the agreed price and terms as promptly as practicable,” urging its shareholders to back Musk’s bid.

“The board and Mr. Musk agreed to a transaction at $54.20 per share. We believe this agreement is in the best interest of all shareholders. We intend to close the transaction and enforce the merger agreement,” Twitter’s board stated. 

Appearing to negotiate further aspects of the deal off the cuff in public, or more specifically tweet by tweet, Musk, according to analysts, was attempting to drive down Twitter’s sale price, or possibly walk away from the deal altogether. 

Ann Lipton, professor of corporate governance at Tulane Law School, said, “All of this is just him making a lot of noise and showing the kind of headaches that he would cause for the company if they were to try to litigate this.”

According to a regulatory finding, Musk told Twitter that completing due diligence on the social media company was not necessary before signing the agreement, The Times reported. 

In the filing, Twitter warned, “If the merger is not completed, and depending on the circumstances that cause the merger not to be completed, the price of our common stock may decline significantly.”

“If the bot figure is so important to his assessment of the value of the company, he should have done his due diligence on it before signing the deal,” said Erik Gordon, professor of business at the University of Michigan. “And he should have added an explicit representation about bots to the contract.”

As the Chinese government controls several components important to Tesla’s fortune, a dozen current and former American officials involved in reviewing foreign investments told The Washington Post that national security leaders should be concerned if the Musk-Twitter deal went through. 

Possible conflicts of interest loomed large, including China asking Musk to detect the owners of accounts who oppose its government, block content the Chinese government considers illegal, or allow its propaganda to spread unchecked.

According to The Post, an official who served under former President Barack Obama said the potential access to user data alone is “clearly a significant national security concern,” citing that in 2015, the Chinese government arrested hackers who stole dossiers on U.S. intelligence officers from the Office of Personnel Management’s database. 

On June 6, 2022, Musk doubled down on his demand to see Twitter’s data on the amount of spam and fake accounts, sending a letter to Vijaya Gadde, Twitter’s general counsel and head of legal, policy and trust. 

Musk accused Twitter of “actively resisting and thwarting” his information rights. “This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement,” wrote his attorneys. 

Additionally, the letter accused Twitter of “withholding the requested data due to concern for what Mr. Musk’s own analysis of that data will uncover.”

That same day, Parag Agrawl, Twitter’s CEO, stated that the social media platform “has and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement.” According to CNN, Twitter said it intended to “close the transaction and enforce the merger agreement at the agreed price and terms.”

On June 15, 2022, The Hill reported that Musk said he voted for Mayra Flores (R) in the special election for Texas’s 34th congressional district, which lies between Corpus Christi and the state’s southern border at Brownsville and Matamoros, its sister city in Mexico. 

Flores went on to defeat former Rep. Dan Sanchez (D). According to Rolling Stone, on social media, Flores has promoted the QAnon conspiracy theory, which asserts that the U.S. is run by clandestine Satan-worshipers and pedophiles, who would otherwise have been arrested if Trump were still in office. 

After tweeting that he was leaning towards supporting Florida Gov. Ron DeSantis (R) for a presidential bid, Musk tweeted that he was “thinking of creating a ‘Super Moderate Super PAC’ that supports candidates with centrist views from all parties.” 

Musk also predicted a “massive red wave” in 2022, suggesting that many legislative seats would flip from Democratic to Republican. In May 2022, Musk had tweeted that Democrats had “become the party of division & hate, so I can no longer support them and will vote Republican.” 

On June 16, 2022, Musk had his first open exchange with Twitter’s 7,500 employees in a virtual staff meeting. Staff members asked him whether he would lay people off, if his political views would influence his leadership, and what his views are on policing misinformation. 

Notably, in May 2022, Musk had said he would reverse the Twitter ban of former President Donald Trump, but this comment was not addressed in the meeting. Additionally, The Verge wrote that employees were not allowed to ask if Musk was trying to back out of the deal, or to discuss harassment allegations against him. 

On harmful content, Musk said “extreme” views should be allowed on the platform as long as they did not violate the law. On the question of how such content should be moderated, Musk appeared to sidestep the question, The Post reported. “The standard is more than not offending people. The standard should be that they should be entertained,” Musk said. 

“Really, that means not showing people content that they would find offensive. Or even frankly, boring, is not good. TikTok does a great job of making sure you’re not bored,” Musk added.  

Musk said people needed to “like” being on Twitter, and if they were “harassed or uncomfortable,” the product would lose a large number of people. The tech billionaire’s statement appeared to be an attempt to address concerns that he would turn Twitter into a free-for-all for misinformation and hate speech. 

According to The Post, overall the town hall did little to quell staff concerns. Two employees, who spoke on the condition of anonymity, said the company’s internal Slack channels were rife with comments from frustrated employees. Many were also outraged when Musk said he would fire underperforming staff. 

Other employees told The Verge that the meeting reinforced their concerns of Musk becoming Twitter’s owner, describing it as “incoherent; rambling; uninspiring.”

Outcome

Musk backs out of acquisition, Twitter sues

On July 8, Musk’s lawyers announced that he was terminating the deal due to the ongoing disagreement over the number of spam accounts on Twitter, maintaining the stance that he was provided with insufficient data. 

When entering into the agreement, Twitter had “made false and misleading representations,” Musk’s lawyers said. According to Reuters, Musk also said he was walking away due to Twitter firing high-ranking executives and a significant number of talent-acquisition employees.

In response, Twitter chairman Bret Taylor tweeted that Twitter was “committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.”

According to The Times, many corporate cases are heard in Delaware, where Twitter is registered. Since Musk signed the contract, many legal experts contend that Twitter has an advantage. However, Musk is backed by a number of top bankers and lawyers.  

Adam Sterling, executive director of the Berkeley Center for Law and Business, said, “Twitter has an obligation to fight Musk on this, which they’d need to do because they have a fiduciary duty to do what’s best for shareholders and salvage the deal,” adding that the dispute would likely result in “some sort of settlement that allows both sides to save face.”

Musk’s contract with Twitter included a $1 billion break-up fee, and a clause that permitted Twitter to sue Musk and force him to complete the deal as long as financing remained intact and regulators did not block the deal.  

On July 12, Twitter sued Musk in the Delaware Court of Chancery, which specializes in corporate disputes, Axios reported. “Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests,” the lawsuit stated. 

But on Oct. 3, less than two weeks before the Twitter lawsuit was scheduled to go on trial, Musk’s legal team advised the company that he wanted to go through with the deal after all. A letter stated that Musk would abide by the original agreement – $54.20 a share – if Twitter dropped the lawsuit. The $44 million deal was completed on Oct. 27. 

Free Speech concerns arise

Musk stated that he would seek to balance Free Speech and expression. “That said, Twitter obviously cannot become a free-for-all hellscape, where anything can be said with no consequences!” he wrote. Nevertheless, concerns rose over the future of Free Speech on the platform and his willingness to combat disinformation.

Suzanne Nossel, CEO of PEN America, a leading free expression nonprofit, expressed concern over Musk’s plans for Twitter in an op-ed for the Los Angeles Times. 

“Elon Musk has said that, in the name of upholding free speech, he will dial back safeguards on the platform that are there to protect against disinformation. This would be a mistake, and not just because disinformation has fueled a crisis of faith in democracy and impeded pandemic response at the cost of hundreds of thousands of lives,” Nossel wrote. “Disinformation, though largely protected by the 1st Amendment against government control, can also imperil free speech itself. If Musk is serious about fostering open discourse, he needs to account for the dangers that disinformation poses to expression as he takes over one of the world’s most influential online platforms.” 

Nina Jankowicz, a disinformation expert and former executive director of the defunct Disinformation Governance Board, echoed similar concerns.

“For a free speech absolutist to take control of a platform like Twitter, where so many people spend their time and . . .  where there’s a lot of debate going on, this is not just about, you know, allowing a free speech free-for-all,” Jankowicz told NPR. “This is about eventually silencing marginalized voices. That free speech free-for-all is going to mean less speech for marginalized groups.”

On Oct. 31, Musk became the sole director of Twitter after dissolving the company’s Board of Directors, The Hill reported.

Hate speech surges on Twitter

Reportedly, Twitter saw a rapid uptick in hate speech after the purchase. 

A Nov. 1 report from Montclair State University’s School of Communication and Media noted an “immediate spike” in the use of “vulgar and hostile terms for individuals based on race, religion, ethnicity, and orientation.” Terms considered hate speech were tweeted an estimated 4,778 times on Oct. 28 between midnight and noon, the first twelve hours after Musk’s acquisition.

“The character of what Twitter will look like with Musk as the head remains speculative, despite his stated intentions,” the report stated. “What is not speculative, however, is the extent to which his date of formal acquisition was celebrated by racist and extremist users on the platform.”

Similar research from the Network Contagion Research Institute (NCRI), an independent organization that assesses cyber-social threats, found that in the first twelve hours after Musk’s acquisition, use of the N-word on Twitter increased almost 500% from the pre-purchase average.

Several posts on 4chan encouraged users to amplify derogatory slurs,” NCRI stated.

Updates

Elon Musk releases information on Twitter’s suppression of Hunter Biden laptop story

Twitter suspends journalists’ accounts over reporting on Musk’s private jet

Elon Musk fires Twitter employees for criticizing him