Elon Musk Twitter deal: why did Tesla CEO pull out, has he been sued, how have Twitter shares been affected?

Elon Musk is the world’s richest person, with a net worth that vastly outguns those of billionaires like Jeff Bezos and Bill Gates.

The Tesla CEO’s businesses and wealth have made him a celebrity, but his private life has also courted attention thanks to relationships with Grimes and Amber Heard and reports of lovechildren with senior Neuralink executive Shivon Zilis.

In April 2022, Mr Musk launched a controversial buyout of Twitter - a deal that he said would lead to a fundamental reset of the social media platform’s freedom of expression policy.

However, after announcing the pause of his bid in May, he revealed that he was to drop out of the deal altogether. Twitter was less than impressed with this move, and launched legal action against the tech mogul.

Now Musk has announced that he has put an end to the legal action and will proceed with the sale, two week before the social media site was due to begin putting its case forward in the lawsuit.

When did Elon Musk launch Twitter takeover?

On 4 April, Elon Musk bought a 9.1% stake in Twitter before announcing that he would seek to purchase the social media giant in a $44 billion (£37.2 billion) deal.

Despite initial resistance from Twitter’s board, including CEO Parag Agrawal, it’s believed shareholder pressure led it to accept the deal of $54.20 a share being offered by Mr Musk.

Over the ensuing weeks, the tech entrepreneur outlined his vision for how Twitter would look under his ownership.

These plans included changes to the site’s free speech policies, and the reintegration of banned figures, such as former US President Donald Trump.

He also said he wanted to “own the libs” with his buyout - i.e. frustrate people who are politically central or left-of-centre.

But in May, Mr Musk began to make statements that fuelled uncertainty about whether he would complete his buyout, including saying the deal was “on hold”.

Why did Elon Musk backout Twitter buyout?

After almost two months of uncertainty, Elon Musk announced he was pulling the plug on his Twitter deal on 8 July.

The stated reason given by Mr Musk’s lawyers was that Twitter had “not complied with its contractual obligations” surrounding his takeover. In a letter to the US Securities and Exchange Commission, they wrote that Twitter did not provide enough information for the billionaire to “make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform”.

Fake or spam accounts could be important for Mr Musk’s bid because he has suggested that he wants to monetise the platform’s userbase. If a high proportion of Twitter’s users are not real people, organisations or companies, it could lower the amount of money he could generate from the site.

For years, Twitter has said in its regulatory filings that it believes 5% of the accounts on its site are fake. However, some commentators have said they believe Elon Musk’s bid was never truly serious, and may instead have been an attempt to disrupt Twitter or force it to change its freedom of speech policies.

For example, his share price offer includes the number 420 - a reference to weed - that he’s used before in an apparent attempt to troll people.

If Elon Musk’s intention was to disrupt Twitter, he’s certainly achieved his goal.

Since the takeover was announced, the company has brought in a hiring freeze, laid off workers, halted discretionary spending and fired two of its top managers.

Its share price has also dipped from a high of $38.75 when markets closed on 7 July to $32.65 at the close on 11 July.

What has Twitter said about Elon Musk deal?

Immediately after Elon Musk announced his Twitter deal was over, Twitter chair Bret Taylor said the company was “committed to closing the transaction on the price and terms agreed upon”.

He suggested the company would sue the entrepreneur in a Delaware state court if that was not possible.

On 13 July, Twitter took another step towards suing Mr Musk, with Taylor tweeting out a copy of its 62-page lawsuit.

The document opens with the accusation that “Musk refuses to honour his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests”.

It continues: “Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, Musk apparently believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.”

Twitter’s use of Delaware as the legal jurisdiction for the deal was significant, because the state court there has previously forced a company - Tyson Foods - to complete a takeover of another business - IBP - after Tyson attempted to pull out of the deal.

Why did Elon Musk return to the Twitter deal?

On 4 October, it was announced that Musk had ended the legal action after agreeing to move ahead with the original $44 billion offer. A filling by Twitter to the US Securities and Exchange Commission showed a letter from the Tesla boss which detail his intentions.

After receiving the letter, Twitter confirmed that it would be sticking with the price of $54.20 per share.