the money game

Did Elon Musk Give Up Because His Silicon Valley Friends Were Humiliated?

Ignore the past few months of vicious legal battling. Photo: Carina Johansen/NTB/AFP via Getty Images

The world’s richest man has capitulated in his quest to break his most expensive promise ever — spend $44 billion to buy Twitter. In an Oct. 3 letter to Twitter’s board, Musk intends “to proceed to closing of the transaction” that he had originally agreed to nearly six months ago. The news emerges after what was probably his worst week ever in the trial, a particularly rough one for many of the most powerful people in Silicon Valley, whose texts revealed that these supposed investment geniuses are a bunch of simpering yes-men trying to use Elon Musk to further their riches.

If there’s any takeaway from this case, it’s that the deal isn’t done until the money is transferred into Twitter’s bank account and the keys are in Musk’s hands. It’s still up to Twitter to accept the deal and for the court to sign off on it. According to the Wall Street Journal, the judge overseeing the case, Chancellor Kathaleen McCormick, told the two parties to hammer out a deal by the end of the day. (It appears that this isn’t technically a settlement, and there may be more litigation down the road to keep the deal from falling apart again). Musk’s letter does makes it clear that there are strings attached to his offer to go through with the deal, which is that the trial is adjourned, all court action related to the case is stayed, and the financing goes through. Is this a good deal for Twitter? The company tweeted out that it intends “to close the transaction at $54.20 per share,” the agreed-to price from April, but that doesn’t say anything about whether or not they’ll agree to this specific deal. If the case did end up going to trial, Twitter would have been entitled to about $300 million in prejudgement interest, essentially a penalty against Musk for having the suit go on, according to an informed attorney who’s been closely watching this trial. Still, Musk could end up walking away with Twitter in a matter of days. So all this legal back-and-forth may end up being for nothing. (At least we all got a good laugh out of it?)

Twitter v. Musk has been the biggest case in the business world in about a decade — a high-stakes and often confusing clash between one of Silicon Valley’s most powerful men and one of the most influential social-media companies in the world. In April, after Musk had quietly amassed a stake in the company, he offered to buy it outright for $54.20 a share, an amount that represented a premium above its stock price, and included his characteristic weed joke. It was a shotgun marriage: a deal signed after no due diligence from Musk that gave him very little room to terminate the whole thing. Soon after, markets tanked, as did the market value of Twitter. Since Musk’s personal fortune was caught up in his falling Tesla shares, his own wealth was on the line. Musk complained about spambots on the platform, and those complaints became his pretext for scuttling the deal entirely. The animosity on both sides grew, so by the time Twitter filed its complaint asking a judge to enforce the deal, the company was insisting that a man who it said was untrustworthy should buy it even though he no longer wanted to — a deal that would make only the shareholders happy. After that, it emerged that there was a whistleblower who had gone to Congress and the SEC to say that the company was rife with fraud, which Twitter denied.

It’s worth speculating on why this is happening now, with a trial scheduled to start in less than two weeks. It’s been apparent from early on, before the first complaint was filed, that Musk would have an extremely hard time getting out of this deal, and the odds of him winning only shrunk as time went on. The cost of actually financing this deal has skyrocketed since interest rates have only gone up since this past spring. Musk’s deposition is also scheduled for later this week. The crux of the trial revolved around an idiosyncratic measure called monetizable daily active users, or mDAU; Musk said with scant evidence that there were more bots caught in this metric than Twitter let on, though proving that before the court would be a huge hurdle. But last week was different, and it wouldn’t be surprising if the social pressure got to him. While Musk himself is famously beyond the realm of the humiliated — a person who feels approximately the number of emotions as one of his arthritic-looking robots — the cache of texts released by the Delaware Chancery Court last week deflated the egos of a good chunk of the Silicon Valley billionaire class. Not only was there Larry Ellison, Oracle’s founder and CEO, looking like he was getting taken for a ride, but some of venture capital’s biggest tough guys ended up looking puny and pathetic. “You know I’m ride or die brother — I’d jump on a grande [sic] for you,” VC Jason Calacanis texted to Musk after he was caught trying to sneak his way into the deal.

Most normal people tend to think, If I were a billionaire, why would I care about what people say about me? My own observation on the self-made rich — having reported on them for the past decade or so — is that they got that way because they’re extremely sensitive about criticism, class status, and what it could mean about their future rise up the Forbes list. Musk’s texts also revealed that, despite his reputation as someone who only listens to himself, he actually has surrounded himself with an endless number of boosters who are happy to indulge him if they can profit. A court case would undoubtedly reveal more about their conversations — things said in depositions, letters, any texts still under seal. If you’re a billionaire whose reputation is already hurting from a handful of humbling texts, I imagine you’d be pushing for Musk to get this deal and keep all that from coming to light, too.

Did Musk Give Up Because His Rich Friends Were Humiliated?