Look, I used to be prepared to imagine I’d known as it incorrect after the merger settlement went via. Possibly Elon Musk was severe for a change! Possibly he actually did wish to personal an also-ran social community! Possibly Musk was actually trying ahead to giving himself ulcers coping with content material moderation points! Individuals have finished weirder shit for energy, and I feel we are able to all agree that Elon Musk is deeply excited by energy. Why else would he be busy testing how effectively People implement their legal guidelines?
A fast recap: Musk is making an attempt to do a runner on the Twitter acquisition, and Twitter isn’t having it. Twitter lawyered up within the rudest potential trend: with the agency that got here up with the poison tablet. That agency then filed a lawsuit towards Musk to attempt to drive the merger to undergo.
When the Twitter criticism dropped, my impression, on the primary learn, was that somebody actually had quite a lot of enjoyable placing it collectively, not least as a result of the screenshot of Musk’s poop tweet acquired included:
I really like a superb lawsuit. Can Twitter win? “He signed a contract, it says what it says,” says Tom Redburn, the chair of securities litigation at Lowenstein Sandler, after he finishes laughing at my exasperation. As a result of Musk waived due diligence — that’s the factor if you perform a little research on the corporate you’re buying earlier than you conform to an acquisition — his potential to stroll away from the deal is constrained. “That’s a tricky place for a purchaser to be in,” Redburn says.
In actual fact, Delaware’s Chancery Court docket, which is broadly utilized by companies, tends to be pretty unsympathetic to purchaser’s regret, Redburn says. There’s one high-profile case the place a purchaser efficiently acquired out of a transaction — and it was due to fraud. In 2018, medical group Fresenius, finest recognized for its US dialysis service, efficiently didn’t purchase drugmaker Akorn as a result of Akorn hid a complete bunch of enterprise issues. “Fresenius was in a position to show Akorn was making up its knowledge,” Redburn says. That would put one thing of a damper on a merger!
That is form of completely different from a half-baked assertion that Twitter’s accounting for inauthentic exercise is incorrect. Musk’s transparently bad-faith rationale for getting out of the take care of Twitter is that there are too many spambots, and the corporate gained’t give him the info he wants to find out precisely what number of there are. Pathetic. Even when that’s true — and I’ve no motive to imagine it’s — Musk’s group nonetheless has to show that it issues in some materials solution to the enterprise.
“In the event you take the antics out of it, this isn’t an atypical form of lawsuit,” Redburn says. “We’ve seen a good quantity of this over the previous couple of years.” In the course of the pandemic, as an illustration, non-public fairness agency Kohlberg & Firm tried to weasel its means out of a $550 million settlement to purchase a cake ornament firm known as DecoPac. The presiding choose, Kathaleen McCormick, determined towards Kohlberg, which grew to become the proud(?) proprietor of DecoPac in Might 2021. McCormick is now the chancellor, which is what Delaware calls the fanciest choose in chancery court docket.
Now, I don’t know that the Twitter case is essentially going to go to trial. It appears potential Twitter is prepared to settle, maybe by demanding the next payout than the $1 billion specified within the contract from Musk if the transaction didn’t undergo. I suppose Twitter may renegotiate the transaction at a decrease price, but when I had been Twitter’s board, I definitely wouldn’t try this as a result of then you’re nonetheless in an settlement with Elon Musk, and that shit is for suckers. Although I suppose there’s empirical proof at this level that the board composition is solely suckers.
However the mechanism for these outcomes is the lawsuit Twitter filed — it has to stay dedicated to the little bit of being bought by Musk as a way to get any form of comfort prize. So the following enjoyable half will probably be discovery. All it takes is one e mail or textual content the place Musk admits he’s not severe in regards to the deal to nuke his whole place. And due to Musk’s lack of impulse management, it strikes me as potential that somebody goaded him into saying so.
So what are Musk’s probabilities? Famous brief sellers Hindenburg Analysis — chances are you’ll bear in mind them as those alleging fraud at electrical automobile corporations Nikola and Lordstown Motors, leading to SEC investigations — have gone lengthy on Twitter, successfully shorting Musk. Plus, Bloomberg’s Matt Levine, an precise lawyer, has combed via the specifics of the go well with, and I’m not going to do a greater job. What I’m excited by, nevertheless, is a really annoying dialog I’ve had with folks during the last a number of weeks: what dumbfuck nonsense made Twitter’s board take Musk significantly within the first place?
Each time I’ve requested this query, I’ve gotten some method of gibberish about fiduciary obligation. Principally the thought is that maximizing shareholder worth implies that Musk’s clearly unserious provide have to be taken significantly as a result of, gee whiz, it will be some huge cash for shareholders if it had been actual.
However that’s precisely what I imply!!!!!! Elon Musk famously says he’ll do quite a lot of issues and does a couple of quarter of them — possibly much less — and normally behind schedule. In case you are being wooed for a buyout by somebody with a historical past of poor impulse management, violating agreements and launch licenses, ignoring regulators (bear in mind “I don’t respect the SEC”?), and bluffing that he’ll take his firm non-public, your normal commonsense fiduciary obligation is to inform him to get misplaced. Wait and see if he’ll try this tender provide he was threatening or if he’ll lose curiosity as a result of one thing else new and glossy comes alongside. I imply, this man sired 10 recognized children with what number of ladies? This doesn’t precisely recommend a knack for dedication or, frankly, a lot of an consideration span.
Man, the extra I give it some thought, the angrier I get in regards to the dumb little lectures about fiduciary obligation. Anybody who’s adopted Musk is aware of about his try at beginning a media firm, not excited about easy methods to monetize, after which instantly shutting it down as a result of, I assume, it bored him? I’m referring to the short-lived Thud, which was form of like MSCHF however with no enterprise mannequin. Musk got here up with it as a result of he didn’t purchase The Onion when it was on the market; Thud folded earlier than it ever had an opportunity to do something thrilling.
So what’s the true factor Twitter’s board ought to have finished?
Nicely, clearly they should seek the advice of with their monetary and authorized advisors. The board in all probability ought to have heard Musk out. However one factor that board can then do is say “no ❤️” and go about its enterprise!
Like sure, certain, maximizing worth is essential for shareholders, however let’s have a look at how the dumbfuck nonsense Twitter’s board selected to do is figuring out:
- Firings of key personnel
- Impolite tweets by Musk about Twitter workers, prompting harassment from his flying monkeys
- Stopping long-term product growth
- Distracting workers and making the corporate a extra disagreeable place to work
- Costly litigation
This isn’t what I might name maximizing shareholder worth; it’s operating the enterprise into the bottom, screwing the shareholders within the course of. Are you aware what in all probability would have truly maximized shareholder worth and in addition been very satisfying? Telling Elon Musk to fuck off.