The Twitter adventure may cost Elon Musk a lot of money
Elon Musk prefers to cover his back in his legal battle with Twitter, so he sold in early August nearly 7 billion USD of shares in his car company Tesla.
In a document filed with the SEC, the U.S. securities regulator and published Tuesday evening, the multi-billionaire has sold about 7.9 million shares of Tesla between August 5 and 9.
Elon Musk tweeted in the night of Tuesday to Wednesday, August 10; he explained that he wanted to “avoid an emergency sale of Tesla shares” in the scenario – which he hopes is “unlikely” – where he would be forced to buy Twitter and lose the support of some of his financial partners.
At the end of April 2022l, he had already sold some 8.5 billion USD worth of shares in his car company to prepare to acquire the social network.
At the time, Elon Musk had assured us that there would be no further sales of Tesla shares.
Elon Musk has more than 15 billion USD in his pocket from these sales of shares; amid a legal battle over his broken promise to buy Twitter, the ebullient entrepreneur could be preparing either to pay compensation or to finance the buyout finally, analysts estimated.
“It may be that Musk will try to resolve this explosive situation before the trial date in October (…) with a massive settlement,” suggested Dan Ives, of Wedbush Securities. The analyst considered that the chances of a settlement with Twitter possibly involving a payment “ranging from 5 to 10 billion USD” were “now more likely”.
Tesla shares were up 2.50% to 871.25 USD at around 16:00 GMT. That of Twitter climbed 3.56% to 44.35 USD.
Elon Musk had challenged the boss of Twitter to publicly debate and prove the share of false accounts on the social network, a point of disagreement put forward by the multi-billionaire to withdraw his bid. Elon Musk signed a 44 billion USD agreement to buy Twitter in April before breaking it unilaterally in early July.
The Tesla boss believes that Twitter lied about the proportion of automated accounts and spam on its platform, and even claims that the network has “defrauded” by deliberately increasing the number of magnetizable accounts.
The multi-billionaire asked Twitter’s CEO, Parag Agrawal, to “publicly discuss the percentage of fake accounts” and “prove to the public that Twitter has less than 5% of fake or unwanted daily users”.
The legal battle has been launched: a trial is scheduled to start on October 17 in the Delaware Court of Chancery, a court that specializes in business law and will last five days.
As soon as the takeover agreement was broken, Twitter took the wealthiest man on the planet to court to force him to honour his promise. Elon Musk has counterattacked with a complaint in which he asks the court to release him from the agreement and to order Twitter to pay him damages.
The chances of him getting out of it by only paying the breach fee of the agreement (one billion USD), or being declared in his right, are considered very low by experts.
Twitter’s shareholders are due to meet on September 13 to authorize or not this acquisition by Elon Musk, which would represent a significant capital gain for shareholders. The Tesla boss had initially agreed to offer $54.20 per Twitter share.
Between the general decline of the stock market in recent months, the reduction of advertising revenues of social networks due to the economic situation, and the public criticism of Elon Musk, Twitter’s stock collapsed to about 32 USD on July 11.
The electric vehicle manufacturer, for its part, reported second-quarter solid results at the end of July, with a profit of USD 2.3 billion, almost twice as much as in the same period last year.
At the shareholders’ meeting on Thursday, which voted to split the group’s shares by three on August 25 to make the stock more accessible to smallholders, Elon Musk assured us that the group was thinking about a share buyback program. The next day, he began to sell his shares … “This does not look good for Musk”, commented Dan Ives.