Musk backs away from Twitter deal: Who loses?

Elon Musk's lawyer has told Twitter that the Tesla CEO wants to back out of his $44 billion deal to buy the social media company. Musk had demanded that Twitter provide definitive information on how many of its accounts were legitimate users and how many were bots and fake accounts, and he said the company hasn't provided the information he needs. "Twitter is in material breach of multiple provisions" of their agreement, and "appears to have made false and misleading representations," Musk's lawyers said in the filing, and the company "appears to have made false and misleading representations." The news sent Twitter shares plunging.

Twitter says it has provided Musk with all the information he needs to evaluate its assertion that spam accounts make up only 5 percent of its active users, and it has said it will fight in court to keep Musk from backing out of the deal. Legal experts tell Reuters that Twitter would have a strong case against Musk if he does walk away from the deal, although a settlement could avert a costly court battle. "The argument for settling at something lower is that litigation is expensive," said Adam Badawi, a law professor at UC Berkeley. "And this thing is so messy that it might not be worth it." Who would lose most if Musk abandons his deal to buy Twitter?

Twitter and free speech are the big losers

Musk "now faces a $1 billion breakup fee, as well as extensive litigation with the company," says The Wall Street Journal in an editorial. But going through with the deal would cost him, too. His "takeover financing was heavily leveraged and became more precarious as interest rates rose." Twitter shares have fallen along with the broader market recently, and its user growth has slowed. So Twitter might have needed Musk more than he needed Twitter. Scrapping the deal would be "a loss for the social-media site as well as for political free speech. The only winners will be progressives who support the site's censorship of views that don't conform to theirs on politics, climate, and many other subjects." Twitter needs the reform Musk was promising, with or without him, to make it a true bastion of free speech. "Musk may be hoping to negotiate a lower purchase price, but if he does walk away it will be a loss for political discourse."

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Backing out costs Musk power

The money wasn't the issue for Musk, says Madhavan Narayanan at The Quint. He's the richest man in the world, and he already has all the fame anyone could want. "It is power, the political sort, that must have been a big motivation for Musk as he sought to fly the tweety bird." Musk linked arms "with the controversial (right-wing) side of the 'free speech' lobby." He conducted a Twitter poll in which 70 percent said the site didn't really support free speech. "Musk evidently showed love for the 'Anything Goes' kind of speech just so we would not miss Donald Trump who preferred running his superpower country over Twitter with his rude words" instead of speaking from the White House. Musk also indicated he wanted Trump "back on Twitter after his exit," but both Musk and Trump are out of luck if Musk walks away.

Musk might have already won

What does either side really lose if the deal was never real in the first place? says Erin Prater at Fortune. "As both sides prepare for a lengthy court battle, some Twitter influencers are floating an alternate theory for the change of heart: The bots were never the problem, merely a vehicle through which to covertly sell Tesla options that were about to expire." Josh Wolfe, co-founder of Lux Capital, tweeted Friday that Musk's high-profile bid to take over Twitter might have been a "clever ruse" to allow him to sell $8.5 billion in Tesla stock with a "plausible excuse for doing it." Wolfe said Musk could pay the $1 billion breakup fee and $100 million for litigation and walk away with more than $7 billion in liquidated stock. "Honestly," Wolfe wrote, "think he can 'land rockets' but can't fix 'bots'?"

Everybody loses. Well, almost everybody.

There are no winners in the "Elon Musk vs. Twitter fracas," says Dan Primack at Axios. Musk is the "biggest loser." Even if all of his "unforced errors" only "hurt his reputation," he may have "eliminated any chance he'll ever again be taken seriously when trying to buy a company not co-founded by his cousins." And in the worst-case scenario he also loses a ton of money. Twitter employees have lost as they sat in a "prickly limbo," with some facing financial loss as the chaos devalues their shares and stock options. Twitter's board, which initially tried to block Musk's takeover bid, surely has "morning-after regret" for having "caved." "Musk fanboys" and "fangirls" can't be happy, either, although they now can peddle the theory that Musk wants a lawsuit to force Twitter to be more transparent with its "bot" data. "But don't worry, there are some winners: Lawyers racking up billable hours."