New legal challenges could further impact Elon Musk’s takeover of Twitter
As the fifth week of the Elon Musk Twitter takeover drama draws to a close, let’s just check how things are progressing.
Oh, that’s bad. Nothing good to see here.
This week, as Musk argues that his $44 billion takeover bid remains “on hold” due to questions about the accuracy of Twitter’s claim that 5% of its active users are fake, Twitter him -even faced its own drama, related to the push for redemption.
Having already lost several senior executives, directly or indirectly due to the impending change of ownership (as well as former CEO Jack Dorsey leaving the company altogether), Twitter now faces a battle over its board members, with Egon Durban of Silver Lake Partners resigned from the board after Twitter shareholders blocked his re-election.
Durban won a seat on Twitter’s board of directors in 2020, following a push by Elliott Management Group to buy Twitter stock and force Jack Dorsey out as CEO. Elliott’s view was that Dorsey was underperforming, and he teamed up with Silver Lake to pressure the company to improve results or accept a change in management.
This led Twitter to set tough new revenue and growth targets, which it recently admitted was not on track to meet.
In addition to his work with Twitter and various other public companies, Durban is also a longtime ally of Elon Musk, and earlier this week Twitter shareholders voted to block Durban from reappointment, in a move that many considered a statement. of protest, of sorts, from Twitter investors.
But as with everything Elon and Twitter, it’s not that simple – today Twitter itself refused to accept Durban’s resignation.
In a statement to the SEC, Twitter explained that Durban’s board re-election was likely rejected by shareholders as he also sits on the boards of six other listed companies. Durban has vowed to step back from those other commitments, which Twitter says is enough to keep him on his team.
According to Twitter:
“While the Board does not believe that Mr. Durban’s other public company directorships will become an impediment should such commitments continue, Mr. Durban’s commitment to reduce his service commitment to the Board of Directors to five public company boards by the Correction Date appropriately addresses the concerns raised by shareholders with respect to these undertakings. Accordingly, the Board of Directors has concluded that Accepting Mr. Durban’s resignation at this stage is not in the best interest of the company.”
Why does Twitter want to keep Durban on? It’s hard to say, especially since Musk noted that he would seek to eliminate Twitter’s board of directors if he became the owner of the platform.
Including key investor representatives, however, can ensure Twitter maintains a level of stability, should the deal go south.
And there could be another key reason for maintaining the link between Twitter’s board and Musk.
On another front, Twitter shareholders are also considering a class action lawsuit against Elon Musk on his Twitter takeover campaign, based on the allegation that Musk “violated California corporate laws on multiple fronts” with his commentary on the Twitter acquisition, effectively engaging in market manipulation.
As reported by CNBC:
“In a potential breach, they claim Musk benefited financially by delaying required disclosures about his Twitter stake and temporarily concealing his plans in early April to become a member of the social network’s board of directors. Musk also took stock on Twitter, the complaint says, when he knew inside information about the company based on private conversations with board members and executives, including former CEO Jack. Dorsey, a longtime friend of Musk, and Silver Lake co-CEO Egon Durban. , a Twitter board member whose company had previously invested in SolarCity before Tesla acquired it.
Perhaps that’s why Twitter wants to keep Durban in-house, both because of its past relationship with Musk, which may help smooth the deal, or to help shareholders with their class action lawsuit.
Durban’s current involvement probably doesn’t carry any additional legal weight in this regard, but there may be a connection between these two aspects of the increasingly messy Twitter deal.
And yes, there is always the possibility that Musk’s takeover may not happen.
Musk himself has repeatedly and publicly sworn he won’t pay for the company unless it can convince him his fake profile data is accurate – though Twitter maintains the deal isn’t. does not exist and continues to prepare for the final transaction to be approved.
But there may also be other complications, with the SEC currently investigating Musk’s conduct ahead of his Twitter takeover. Add to that his numerous criticisms and public revelations, which border on market manipulation (in line with the stockholders’ proposed action) and there may well be a breaking point for Musk’s Twitter deal, where authorities will oppose simply vetoing the process entirely because of his conduct.
Could this be Musk’s plan? Various analysts have suggested that Musk is looking for a way out of the acquisition, and while the general feeling is that Musk will eventually be forced to pay and take ownership of the app, there are still some legal cracks he could explore what could end the transaction.
Which would be a disaster for Twitter.
While investors are unhappy with Musk right now, especially as his various comments and criticisms have sent the stock plummeting, Musk’s walk away would leave Twitter in a much lesser state, with many product leaders gone and a declining share price that would be difficult to correct. , given the various questions raised by Musk about his processes.
Could Twitter get back on track and back to growth if Musk abandons his takeover?
Essentially, Musk’s departure would be a big public statement that Twitter is not a good investment, and as the hype wears off, it could see interest in the app dwindle even further, hurting the growth for, potentially, the years to come.
Maybe that’s Musk’s real intention here – to hurt the company so much that he has no choice but to accept a lower offer price, which could save Elon him. -even millions in its takeover bid.
Either way, things aren’t going well right now, and there are a lot of moving parts that have to keep Twitter’s current CEO, Parag Agrawal, up at night.
It always looks like the Elon era is coming, but when, exactly, is a whole other question.