Traditionally, negotiations around mergers and acquisitions take place behind the scenes. Bankers and lawyers from both sides — the acquirer and the target — talk away from the media spotlight.
The media generally discover the existence of a potential transaction via leaks, an official filing or a vetted press release from one or both parties.
The progress of the negotiations is often documented through the press. Often as well, when negotiations are at a standstill, one party organizes leaks to the media to try to unblock the situation by forcing the other side's hand.
The general public and employees of the target company often find out about everything through the press.
Rarely are discussions held publicly. One of the reasons for this discretion and secrecy is to avoid manipulating the markets.
All these traditional rules have been shattered with the proposed $44 billion acquisition of Twitter by Tesla (TSLA) CEO Elon Musk.
Twitter's Future Is Decided on Twitter
To be clear, Musk has advisers, including the investment bank Morgan Stanley and lawyers at Skadden, Arps, Slate, Meagher & Flom, led by Mike Ringler.
But this time, Musk is the one leading the dance.
The tech tycoon, who considers the microblogging website the de facto town square of our times, has a not very subtle message to deliver.
That is: "I have nothing to hide."
That's in tune with the spirit of the times, in which everything is shared on social media, transparently and in real time.
Users are thus invited to play judge by taking sides.
But it would be more accurate to say that the general public is called on to designate the executioner and the victim, to divide the wrongs from the rights, and ultimately to distribute blame when things go badly.
On April 4, Musk said he had become a shareholder of Twitter with a 9.2% stake. On April 14, the world's richest man made a bid of $54.20 a Twitter share, or $44 billion, to acquire the entire company.
He explained that his transaction aimed to restore the principles of free speech and to solve the problem of the spam bots, or fake accounts, that abound on the platform.
Faced with reluctance from the Twitter board, Musk embarked on a public campaign to pressure the company — essentially using social media to win over public opinion for his bid.
"I made an offer," the billionaire tweeted on April 14, with a link to a financial statement with all the details.
A Public Campaign for the Deal Terms
Each user could thus consult the document and decide whether the proposal was fair or not.
As usual, Musk then held a poll to launch a public campaign against the board.
"Taking Twitter private at $54.20 should be up to shareholders, not the board," he asserted.
In addition to this poll, Musk also began to publicly denigrate the board and management of Twitter. Remarkably, the company eventually gave in.
But faced with questions about the financing of the deal and falling markets, the mogul relaunched his campaign -- for a price significantly lower than the proposed $54.20 a share.
Indeed, since the billionaire's offer, Twitter's share price — which had closed at $45.85 on April 13, the day before the announcement of the hostile takeover — has fallen by 16%. It's currently trading around $40.
Threats to Walk Away From the Deal
Instead of seeking to privately negotiate a reduction in the initial price, Musk opted for a public showdown and a public renegotiation marked by threats to walk away.
And instead of talking about the changed environment, he unearthed an old and well-known problem at Twitter and has linked the future of his offer to a fully transparent accounting of the platform's fake accounts.
Basically, the mogul is accusing Twitter of financial misrepresentation linked to these false or spam accounts, even as the company has included in its financial disclosures -- for every year since 2013 -- an estimate of how many of those accounts are on the platform.
"We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the first quarter of 2022 represented fewer than 5% of our mDAU during the quarter," Twitter wrote in its 10-Q filed with the Securities and Exchange Commission on May 2.
MDAU refers to monetizable daily active users or usage, an important metric for advertisers.
On June 6, Musk threatened to terminate the merger if Twitter didn't provide him the information he said he has been seeking about the number of bots.
"Based on Twitter's behavior to date, and the company's latest correspondence in particular, Mr. Musk believes the company is actively resisting and thwarting his information rights (and the company's corresponding obligations) under the merger agreement," Musk wrote in a letter filed with the SEC.
"This is a clear material breach of Twitter's obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement," it said.
You can read the entirety of that SEC filing here.
A New Tradition of Negotiation?
So how successful will Musk ultimately be with these tactics?
Twitter and spam bots are an old story and Musk knows the chorus well. In April, he twice said that one of his priorities in buying Twitter was to get rid of these fake accounts.
"If our twitter bid succeeds, we will defeat the spam bots or die trying!," Musk wrote on April 21.
Musk also spoke about the fake-account situation earlier this month, during a TED interview with Chris Anderson.
"I mean, frankly a top priority I would have is eliminating the spam and scam bots and the bot armies that are on Twitter," he said.
"I think these influence … They make the product much worse. If I had a dogecoin for every crypto scam I saw, I would have a hundred billion dogecoin."
Twitter's board has not moved. It continues to claim that the transaction will be priced at $54.20 — and has already warned shareholders to brace for significant litigation costs if the deal falls through.
No matter the outcome of this standoff, Musk has shown once again that he does things his way.
Traditions are not for him. This is neither the first time nor the last time that the billionaire will distinguish himself from his peers.
It's the new tradition. And as long as Musk persists with it, it will last.
