What's Next for Elon Musk and Twitter: Twitter Shares Details of Deal With Elon Musk (Published 2022) (2024)

If the $44 billion deal between Elon Musk and Twitter falls apart, either side may have to pay the other $1 billion, according to a securities filing on Tuesday.

The world’s richest man struck a deal on Monday to buy the social media company for $54.20 a share. Mr. Musk, who also leads the electric carmaker Tesla and the rocket maker SpaceX, has said he plans to take Twitter private and that he wants to improve the product and promote free speech on the platform.

The deal is not set to close for another three to six months, Twitter told its employees on Monday. According to Tuesday’s filing, Twitter would have to pay Mr. Musk in certain circ*mstances if the deal goes awry. That would include if the social media company signed a deal with another suitor whose offer it deemed superior. Mr. Musk, for his part, would have to pay if his financing for the deal falls apart.

Twitter declined to comment. Mr. Musk did not immediately respond to a request for comment.

Mr. Musk’s financing has played a key role in the deal’s intrigue. He initially did not appear to have any funding lined up for his bid. But last week, he revealed in a filing that he had commitments for loans from various banks. Mr. Musk is paying with $13 billion in bank loans, plus another $12.5 billion in loans against his stock in Tesla. He has pledged another $21 billion in cash, though he has not outlined the source of that money.

Requiring a buyer to agree to a fee if financing falls apart is not atypical, lawyers said. The fee Mr. Musk is on the hook for — roughly 2.5 percent of the deal — is on par with other acquisitions.

“It’s actually a pretty plain vanilla merger agreement,” said Steven Davidoff Solomon, a professor at the School of Law at the University of California, Berkeley.

The filing also said that if a deal does not close by Oct. 24, both sides could walk away. Should the transaction still be awaiting regulatory approval at that time, Mr. Musk and Twitter would have another six months to close it.

U.S. regulators may examine Mr. Musk’s purchase of Twitter but are unlikely to sue to block it, since it is not an example of a company buying a competitor, former antitrust officials have said.

European officials said on Tuesday that Twitter under Mr. Musk’s ownership would have to abide by its new Digital Services Act. The landmark law, which is likely to take effect by next year, requires social media companies to police their platforms more aggressively to fight misinformation and restrict certain online ads.

Mike Isaac contributed reporting.

Twitter agreed on Monday to sell itself to Elon Musk for $54.20 per share. But investors could still buy the stock for less. In fact, shares of Twitter fell nearly 4 percent on Tuesday, the day after the deal was announced, to less than $50 per share.

For investors thinking of buying Twitter’s stock before Mr. Musk takes the company private, that gap is enticing.

When the 10-year Treasury bond yields 2.7 percent, and the stock market looks increasingly risky given rising interest rates, a slowing economy and war in Europe, the potential gain from buying Twitter’s shares now and holding them in hopes that a deal closes may seem worth it. If Mr. Musk successfully closes his acquisition of Twitter, investors would receive $54.20 for each share that they own, 9 percent higher than Tuesday’s closing price.

It’s not unusual for the shares of an acquisition target, like Twitter, to trade for less than what a suitor has promised to pay for them. The gap reflects the risks that an announced deal may not become official, for a variety of reasons. Trying to make money off that gap is known as merger arbitrage.

Often, institutional investors sell shares of an announced acquisition target after the initial “pop” in its shares and so-called arb investors step in. With Twitter, a number of individual investors are making this bet. Twitter was the second-most traded stock on Tuesday among Fidelity’s self-directed retail customers, which do not include mutual funds or retirement accounts. (The first was Tesla.) There were more than twice as many orders to buy than to sell Twitter’s stock.

Many acquisitions take a while to close, as the final paperwork, regulatory reviews and other tasks are completed. The longer a deal takes to close, the higher the risk that something might go wrong and the lower the annualized return on the trade.

A deal can break down because financing dries up, regulators block it or some other unforeseen event derails it. In that case, a company’s stock often falls far below the offer price and arb investors lose out. Since Mr. Musk disclosed that he had bought a large stake in Twitter, the company’s stock is up 26 percent.

When Elon Musk reached a deal to buy Twitter on Monday, he promised to return free speech and debate to the platform, saying it was “the bedrock of a functioning democracy.”

Whether a less moderated social network will be a good or bad thing has become a top topic of debate on Twitter itself among influencers and politicians from across the political spectrum.

On the right, the deal was widely celebrated. Mr. Musk’s ownership, many conservatives tweeted, presaged a new era of free speech — where topics that were previously moderated could now be aired openly.

Several members of the far right started testing the limits of a less regulated platform, tweeting criticism of the transgender community, doubting the effectiveness of masks, or claiming that the 2020 election results were fraudulent — topics that had been moderated by labeling or removing the false information or suspending accounts that spread it.

“Millions of Americans have been choking back their thoughts and opinions on this platform for YEARS out of fear of being suspended/canceled,” John Rich, a member of the country music duo Big and Rich, said in a tweet that received more than 50,000 likes. “I have a feeling the dam is about to break.”

Michael Knowles, a conservative podcaster, repeated on Monday the false claim that “the 2020 presidential election was obviously rigged,” receiving more than 70,000 likes. Representative Andy Barr, a Republican from Kentucky, said that stories about “Hunter Biden’s laptop or evidence that COVID originated in the Wuhan lab” could no longer be censored.

And Representative Marjorie Taylor Greene, a Republican of Georgia known for pushing conspiracy theories, asked that several banned accounts — including those of former President Donald J. Trump, the conspiracist podcaster Alex Jones and even her own personal account —be reactivated.

Her sentiment was echoed off the platform among members of the far-right who were banned from Twitter after violating its terms of service. Michael T. Flynn, the former national security adviser for Mr. Trump who is now aligned with the QAnon conspiracy theory, reposted a message on his Telegram account suggesting that Twitter could be used to recruit — or “wake up” — others to their cause.

“This is mind blowing,” read the post, which was originally posted by a user, named BioClandestine, who was also banned from Twitter. “The impact of the Twitter buyout is going to be colossal as it pertains to waking normies. It’s already begun.”

On the left, much of the conversation was focused on how the deal exemplified the outsize power of billionaires.

“Something is deeply wrong in this country when one person can buy a social media company on a whim for $44 billion while others have to skip meals to keep their kids fed,” said Representative David Cicilline, a Rhode Island Democrat who is backing antitrust reforms to target the tech giants, in a tweet. Senator Elizabeth Warren of Massachusetts said Mr. Musk’s purchase was a sign the United States needed to institute a wealth tax.

Senator Ron Wyden, an Oregon Democrat, said that “protection of Americans’ privacy must be a condition of any sale.” Former antitrust officials have said they think regulators will look closely at the deal but may struggle to find a cause to block it since Twitter does not compete with Mr. Musk’s other major holdings.

Elon Musk has succeeded in convincing Twitter to accept his takeover offer. The deal would mean the world’s richest man, who runs the most valuable car company, is also the owner of one of the most influential social networks. The $44 billion Twitter deal is set to be the biggest leveraged buyout in at least two decades, according to Dealogic.

But while we know now that Twitter is probably getting a new owner, plenty of questions remain about what happens next. The Times’s Lauren Hirsch and Ephrat Livni help answer some in DealBook.

What’s the business plan?

A typical news release about a deal offers insight into turnaround plans, synergies or growth targets. Not Twitter’s. Instead, Mr. Musk said in the statement that he wanted to eliminate spammers and promote free speech. He will have more leeway to act outside of the glare of public shareholders, but his overall strategy is not clear yet.

How will Musk’s free speech vision for Twitter play out?

Angelo Carusone, the chief executive of the nonprofit Media Matters for America, told DealBook that Mr. Musk’s view of free speech was “muddled,” because it elevates all information equally, including potentially extreme views and disinformation. “Twitter has been a vanguard when it comes to policy,” Mr. Carusone said. “I worry about what this will do to the rest of the landscape.”

Will Musk use Twitter to troll the S.E.C.?

Mr. Musk is still in trouble with the agency over his tweets about getting “funding secured” to take Tesla private in 2018. As part of his settlement with the agency, in which Mr. Musk neither admitted nor denied wrongdoing, he also agreed to stay mum about the case. But he has recently said that he was “forced” into a settlement, and he tweeted yesterday that Securities and Exchange Commission officials were “shameless puppets.” His ability to secure funding to acquire Twitter is unlikely to make him more meek. (The S.E.C. did not respond to a request for comment.)

How does China play into this?

The Amazon founder Jeff Bezos is one of many questioning whether Tesla’s sizable dependence on China might give the country some influence on decision-making at Twitter, whose service has been blocked in China for years.

How many jobs does Musk have now?

In addition to soon owning Twitter, Mr. Musk leads Tesla and the rocket maker SpaceX. He also owns the Boring Company, a tunnel-digging firm, and Neuralink, a brain-tech company. Will he be able to juggle it all? Recall that a main reason that the activist investor Elliott Management pushed for Jack Dorsey’s ouster as Twitter’s chief was that he couldn’t effectively run two companies.

Elon Musk struck an agreement on Monday to buy Twitter for roughly $44 billion, setting up the biggest deal to take a company private in at least two decades.

Scrutiny is likely to be intense. Twitter is not the biggest social platform — it has more than 217 million daily users, compared with billions for Facebook and Instagram — but it has had an outsize role in shaping narratives around the world. Political leaders have made it a megaphone, while companies, celebrities and others have used it to hone images and make money.

Mr. Musk’s takeover attracted concern about the world’s richest person having control of an influential communication platform. A director at a women’s rights organization called it “a massively slippery slope.”

Twitter’s board has already unanimously approved the deal. Here’s what’s next for Twitter:

• Shareholders will vote on whether to accept the deal. It will also be reviewed by regulators, but they are unlikely to seriously challenge the transaction, former antitrust officials said, since the government most commonly intervenes to stop a deal when a company is buying a competitor.

• It is expected to take three to six months for the deal to close, according to Twitter’s chief executive, Parag Agrawal. He told Twitter employees that he would remain in his role at least until the deal closes, according to two people who attended an all-hands meeting and were not authorized to speak publicly. He also urged employees to “operate Twitter as we always have.”

• Mr. Musk has repeatedly said he wants to “transform” the platform by promoting more free speech and giving users more control over what they see on it. On Monday, he said he would focus on “new features, making the algorithms open source to increase trust, defeating the spam bots and authenticating all humans.”

• Executives tried to assure employees that they wouldn’t be shortchanged by Mr. Musk’s acquisition. Mr. Agrawal told them that their stock options would convert to cash when the deal with Mr. Musk closes. Employees would receive their same benefits packages for a year after the deal was finalized, and there were no immediate plans for layoffs, he added.

• Conservatives, who feel they have been unduly silenced by social media platforms, cheered the news of Mr. Musk’s deal. Mr. Agrawal was asked by employees whether former President Donald J. Trump, who was banned from the service after the Jan. 6 riot at the Capitol, would be reinstated. Mr. Agrawal deferred, leaving the question for Mr. Musk to answer once he takes over the company. For Mr. Trump’s part, he told Fox News on Monday that he would stick with posting on his own social network, Truth Social.

Kate Conger and Lauren Hirsch, two New York Times writers who have been covering Elon Musk’s bid to buy Twitter, went on Twitter Spaces on Monday — after a long day of reporting — to answer questions from users about what the planned sale would mean for the social media platform. Their discussion was hosted by Sheera Frenkel, who also covers technology for The Times.

Kate Conger: Twitter is sort of a strange and unique creature, and so is Elon. I think he is so hands on with the companies that he runs. And people who work for him have talked about him being, you know, almost too hands on and micromanaging sometimes over decisions. But he’s just very, very involved in what goes on in his companies. And so I think we can probably expect to see more of the same with Twitter.

Lauren Hirsch: One thing that he has been fairly vague on is the actual business model at play and how he’s looking to make money. I was looking at some of the old numbers that Twitter brought in when it had kind of looser policies around content, and they actually began to stall in revenue and began to lose users. So one thing that I’m really curious about is to what extent, well, loosening up on moderation impacts the business and how — or if, frankly — he’s taken that into account as he’s kind of designing a broader economic plan with the new business that he now owns.

Sheera Frenkel: Removing Trump from the platform wasn’t a black or white decision. It wasn’t that he tweeted something that was against the law. It was a calculation made by people at Twitter after a series of tweets that they saw by Trump that made them feel that they should suspend his account. And I think it’s left a lot of people on Twitter asking why Elon Musk wants to own a company that constantly has to make difficult decisions like this.

Twitter’s agreement to be bought by Elon Musk will reignite big questions about the influence of the billionaire class and the power of technology over our national discourse, The Times’s David Leonhardt and Andrew Ross Sorkin write for The Morning newsletter.

The deal is the latest example of how extreme inequality is shaping American society. A small number of very wealthy people end up making decisions that affect millions of others. That has always been true, of course. But it is truer when inequality is so high. In the U.S. economy, wealth inequality has exceeded even the peaks of the 1920s.

This month, Mr. Musk was complaining that Mark Zuckerberg, Meta’s founder, had too much power, arguing that the way Meta was structured, “Mark Zuckerberg the 14th” would someday be running it.

Now Mr. Musk is set to own Twitter outright as a private company. He will report to himself. So if he decides to allow former President Donald J. Trump back on the platform — which seems like the elephant in the room — it will be Mr. Musk’s choice and his choice alone. (Mr. Trump has claimed he will not return, because he wants to support his own social media platform.)

Washington is atwitter trying to understand Mr. Musk’s ideology. He is a self-styled libertarian without an ideology. But is not having an ideology an ideology unto itself?

Mr. Musk has said he wants more “free speech” and less moderation on Twitter. What will that mean in practice? More bullying? More lewd commentary and images? More misinformation?

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As a social network, Twitter is an influential platform that sets the agenda for many in business, politics and society. As a business, it’s a sporadically profitable company with unpredictable cash flow.

Twitter’s financial prospects probably aren’t what attracted Elon Musk.

“I don’t care about the economics at all,” he said at a conference shortly after announcing his offer. And in the statement announcing that Twitter’s board had accepted Mr. Musk’s offer, he mentioned free speech, open-source algorithms and other nonfinancial features of Twitter’s operations that he said have “tremendous potential.”

Twitter reports its first-quarter earnings on Thursday. Analysts expect the company to have generated a profit of nearly $40 million on $1.2 billion in revenue, according to FactSet. Twitter made a profit of more than $140 million in the same quarter last year.

Perhaps more important, as it prepares to take on billions in debt that Mr. Musk raised to finance his purchase, analysts expect Twitter to have recorded $230 million in free cash flow in the first quarter, a bit stronger than last year.

Elon Musk can at times be inscrutable, and his politics are elusive, which has made it somewhat difficult to determine exactly what the billionaire would do if he successfully acquired Twitter. But over the past weeks and months, as he neared Monday’s deal with the company, Mr. Musk has given more hints about what he would change about Twitter — in interviews, regulatory filings and, of course, on his Twitter account.

Here are the main areas Mr. Musk could seek to address:

Free speech and content moderators. Mr. Musk has frequently expressed concern that Twitter’s content moderators go too far and intervene too much on the platform, which he sees as the internet’s “de facto town square.”

He brought up those concerns once again in the release announcing the agreement: “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,” Mr. Musk said.

“I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans” he added. “Twitter has tremendous potential — I look forward to working with the company and the community of users to unlock it.”

In a tweet on Monday, ahead of the announcement of his agreement with Twitter, Mr. Musk said he hoped even his “worst critics” continued to use the platform “because that is what free speech means.”

The Trump question. Mr. Musk has not commented publicly on how he would handle the former President Donald Trump’s banned Twitter account. But his free speech comments have stoked speculation that Twitter under his ownership might reinstate Mr. Trump, who was barred from the platform last year. After the Jan. 6 riot at the Capitol, Twitter said Mr. Trump had violated its policies by inciting violence among his supporters. Facebook also banned Mr. Trump for the same reason.

The former president, who was known for tweets that criticized opponents and sometimes announced policy changes, is also trying to get his own social media site off the ground. His start-up, Truth Social, has struggled to attract users, and the problem could get worse now that Mr. Musk has suggested changing content moderation rules on Twitter. Mr. Trump said in a recent interview that he probably wouldn’t rejoin Twitter.

The algorithm. At a TED conference this month, he elaborated on his plans to make the company’s algorithm an open-source model, which would allow users to see the code showing how certain posts came up in their timelines.

He said the open-source method would be better than “having tweets sort of be mysteriously promoted and demoted with no insight into what’s going on.”

Mr. Musk has also pointed to the politicization of the platform before, and recently tweeted that any social media platform’s policies “are good if the most extreme 10 percent on left and right are equally unhappy.”

Who uses the platform and how. Before Mr. Musk offered to buy Twitter this month, he expressed concern about the relevance of the platform.

When an account posted a list of the 10 most followed Twitter accounts, including former President Barack Obama and the pop stars Justin Bieber and Katy Perry, Mr. Musk responded and wrote: “Most of these ‘top’ accounts tweet rarely and post very little content. Is Twitter dying?”

More recently, the Tesla chief executive promised in a tweet Thursday that he would “defeat the spam bots or die trying!”

In many ways, Elon Musk uses Twitter like the rest of us. He likes to joke around, but he isn’t as funny as he thinks he is; he overshares and loves memes; he occasionally goes too far and gets himself in trouble; he seems to think the platform is unfairly suppressing the views of people with whom he identifies. Thanks to the flattening effects of Twitter, the only real difference between the site’s median user and Mr. Musk is about $257 billion and 85.4 million followers.

Willy Staley, a story editor for The New York Times Magazine who recently edited a special issue about billionaires, writes that what he finds so unsettling about the deal is the strong sense that — even at its most anodyne — it’s an act of vanity, a means of improving the personal experience of one user of the agora.

And this is what’s so dizzying about living in a society with individuals who control so much wealth, he writes: Their whims can be made into reality with startling ease — and their whims can be shaped by the same dumb websites we all use to waste company time. It’s not as if Twitter was run like a kibbutz beforehand, but it responded to a diverse web of stakeholders: Wall Street, customers, users, the press, governments, etc. And now, one $44 billion lark later, it will respond to one man whose frankly complex relationship to the site’s services is apparent to anyone who cares to look.

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