- Elon Musk is the biggest loser in the battle for the future of Twitter.
- Twitter employees and the banks funding the deal are also in a “less than ideal” position, experts said.
- The company of Twitter, its shareholders, its CEO and the lawyers of both parties should emerge victorious.
With a resolution in sight, Elon Musk’s battle with Twitter has left a clear loser – the world’s richest man.
But experts say the bankers, lawyers and employees who have been sucked into Musk’s orbit could also pay the price for the months-long legal battle.
Wedbush technical analyst Dan Ives compared buying Musk to swapping “caviar to buy a $2 slice of pizza.” It’s a bad deal for the billionaire, as well as the dozen or so investors who offered to back the $44 billion buy.
Meanwhile, for corporate Twitter, it’s a clear victory against a man who has been loath to back down in the past, as well as a coup for shareholders who stand to gain if Musk follows through on his offer. Within the company, however, Musk’s potential takeover is already frustrating employees and raising fears of future layoffs.
Here’s who could get hurt in the battle for Twitter’s future — and who will benefit:
Losers
Elon Musk
Musk’s U-turn on buying Twitter is not only a rare case of the billionaire accepting defeat, but it put him in an even worse situation when it comes to financing the deal.
The Tesla CEO has repeatedly denigrated and helped drive down the stock price of the company he plans to buy. Since Musk’s initial takeover bid, Twitter shares have fallen 26%. Although shares of the social media company jumped 22% after the billionaire again announced his intention to buy it, observers say Musk is paying too much, especially compared to Twitter’s main rivals: paying $54.20 per share, Musk will pay more than double the current price. valuation of Meta and Snap, Barron points out.
Musk’s wealth, the majority of which is tied to Tesla’s stock price, also plunged in the months that followed. When he agreed to buy Twitter in April, it was worth $257 billion, according to Bloomberg’s Billionaires Index. Since Twitter’s board accepted Musk’s offer on April 25, Tesla has fallen 28%. Today, Musk is worth about $30 billion less on paper than before he made the original deal.
Musk’s actions also appear to be having a detrimental effect on Twitter’s operations, Stifel analysts Mark Kelley and Thomes Doheny said.
“We believe the business he may soon own is considerably less attractive at this stage, with a steady pace of departures from the ranks and a product that has been in limbo since April when the deal was originally announced.” , Kelley and Doheny wrote in a note published Tuesday.
The banks
Aside from Musk, those funding the deal have the most to lose.
The parties — including Morgan Stanley and Bank of America, to name a few — will face funding for the deal after months of subpoenas and back-and-forth between Twitter and Musk.
“From a banking perspective, it’s less than ideal,” Ives told Reuters. “The banks have their backs to the wall, they have no choice but to fund the deal.”
To make matters more difficult, the deal is now moving forward at a much less favorable time for banks, which are increasingly concerned about rising interest rates and the possibility of a recession. Reuters reported that the banks involved in the deal could face potential losses of “hundreds of millions” as they try to sell to investors who are increasingly wary of taking on riskier debt.
The court battle has also forced investors, including Oracle founder Larry Ellison and Morgan Stanley CEO James Gorman, to air their dirty laundry after the men were subpoenaed and texts between investors and Musk were shared publicly as part of the pretrial discovery process.
Gerard Filitti, lead counsel at The Lawfare Project, an international nonprofit legal think tank and litigation fund based in New York City, told Insider Musk that he might even have been enticed into making the deal by the damage his impending deposition could have on some of his closest relations in the corporate world.
Twitter employees
And for Twitter employees, the whole saga is “devastating,” Harry Kraemer, a management and strategy professor at Northwestern University’s Kellogg School of Management, previously told Insider.
“An organization is its people,” Kraemer said. “Your employees, instead of working, spend most of their time trying to figure out who owns the business? And what will happen to my job? What will happen to my family? How do you plan what your new product or development is going to be next year when you don’t know what’s going to happen next week? The planning sort of stops.”
In fact, the news that Musk had renewed his offer to buy the company also came as Twitter employees were attending 2023 strategy meetings, meetings that some employees fear will become unnecessary under new ownership. One employee, senior financial analyst Parker Lyons, tweeted a meme to that effect, implying that the company’s plans for 2023 were now “worthless”.
Insider’s Kali Hays previously reported that hundreds of Twitter employees have fled the company since June, largely over concerns over Musk’s leadership.
Twitter has suspended hiring and made layoffs since Musk agreed to buy the company. In lawsuit, company attributes actions to pressure from Musk to cut costs, and more layoffs could be looming: At a town hall meeting with Twitter employees in June, Musk alluded to more cost-cutting, saying the business “needs to be healthy.”
Derek Horstmeyer, a finance professor at George Mason University, told Insider via email that Twitter employees could take “a big hit” if Musk takes over.
“I expect a lot of people to quit given the changes Elon wants to make,” Horstmeyer said.
The winners
Twitter is one of the few companies to emerge victorious from a battle against Musk, but its victory is not without its downsides.
Filitti told Insider that Twitter got exactly what it wanted, while avoiding “bad blood and the exorbitant cost of litigation. [which] would significantly harm the company and everyone involved.”
However, Paul Regan, associate professor and associate director of the Institute of Delaware Corporate & Business Law at Widener University Delaware Law School, noted that overall the company will still have to recover from the uncertainty of the trial.
He also faces a future with Musk as a reluctant buyer.
Twitter shareholders
Twitter shareholders have everything to gain from this saga, especially those who bought during the recession.
Carl Icahn, for example, could make a big profit from the deal, The Wall Street Journal reported. The billionaire investor and chairman of Icahn Enterprises has poured around $500 million on Twitter in recent months, buying back shares at a discount after Musk tried to pull out of the deal. As a result, he should see at least a $250 million gain, according to the Journal.
Florida-based hedge fund Pentwater Capital is also expected to gain after becoming a top Twitter shareholder in the second quarter. Now, Pentwater stands to make more than $200 million if the sale goes ahead, CNBC reported.
Sources told the Journal that other big-name investors, including Third Point and DE Shaw Group, have also invested in Twitter as this ordeal unfolds and could be set up to make significant gains.
“Twitter shareholders are the real winners,” Horstmeyer said. “He’s overpaying 50% to 75% for this company.”
Parag Agrawal, CEO of Twitter
Throughout the battle, Twitter CEO Parag Agrawal came across as highly professional — even after a slew of private text messages from his conversations with Musk were posted.
Last month, hundreds of text messages between Musk and some of the most powerful people in Silicon Valley were released as part of the pre-trial discovery process. In the texts, Agrawal was one of the few men who approached Musk without flattering or reacting negatively to the insults the billionaire directed at him.
The Twitter CEO has continually refused to bend the knee to Musk, despite the billionaire’s attempts to walk away from the deal.
In April, Agrawal slammed Musk for publicly questioning the viability of the business.
“You are free to tweet ‘Is Twitter dying?’ or whatever on Twitter,” Agrawal sent to Musk. “But it is my responsibility to tell you that this does not help me improve Twitter in the current context.”
He’s likely to lose his role as CEO if Musk makes the purchase.
But if he does, Agrawal will leave better in the public eye than he did before the court battle.
Lawyers
Both Twitter and Musk have employed more than 50 lawyers from several major law firms in the legal battle.
With lawyers potentially losing millions and the chance to argue at trial, experts tell Insider Musk he could still shell out up to $200 million in legal fees for himself and Twitter after the lawyers have spent months filing nearly a thousand letters in court and hundreds. subpoenas.
Case Western Reserve University business law professor Anat Alon-Beck says litigators, mergers and acquisitions attorneys, and senior partners at these big-name firms can earn up to $2,500 an hour. . She estimated Musk’s costs for attorneys alone at around $30 million. Transperfect CEO Phil Shawe, who has argued cases for his company in the Delaware Court of Chancery, said Musk could easily shell out $7-10 million a month in legal fees and potentially even more in the months leading up to it. the trial.
“The big, big winners of this one will be law firms,” Kraemer said. “These guys are going to make a fortune.”