In Which A New Federal Securities Class Action Correctly Points Out That Musk "Expressly Waived" Due Diligence, In Making His "Firm, Final" Offer...

This is an excellent approach, as this Twitter shareholder group looks to force Mr. Musk to pay the $54.20 he offered. It was a firm "no contingencies" contract, they argue. And I'd say. . . they are right.

Here's that bit from the 72 pager, filed yesterday in federal court in San Francisco:

. . .Before agreeing to buy Twitter for $44 billion, Musk, one of the world’s richest individuals valued at $276 billion according to the Bloomberg Billionaires Index, and a sophisticated businessman with a phalanx of lawyers and investment bankers, according to the press, specifically agreed to waive detailed due diligence as a condition of the merger agreement. At the time, Musk was well aware that Twitter had a certain amount of “fake accounts” and accounts controlled by “bots” and had in fact settled a lawsuit based on the fake accounts for millions of dollars. Musk had tweeted about that issue at Twitter several times in the past, prior to making his offer to acquire Twitter with full knowledge of the bots. . . .

Musk and his team were also well aware of a $809.5 million settlement Twitter entered into in September 2021, in a securities fraud class action alleging Twitter overstated its user numbers and growth rate -- In re Twitter Inc. Securities Litigation, 16-cv-05314, U.S. District Court, Northern District of California (San Francisco). All the documents from that case were publicly available to Musk, including a website (redacted) containing, among other things, the Court’s order denying Twitter’s motion for summary judgment. See Exhibit A (April 17, 2020 Order Denying Motion for Summary Judgment, at p. 16)(holding that Twitter’s false statements about its Daily Active Users (DAUs) and Monthly Active Users (MAUs) were material because “Twitter has publicly stated that its success and financial performance depend, at least in part, on the size and engagement of its user base.”). . . .

Musk believed he was obtaining Twitter at a sale price, since Twitter’s stock price had decreased significantly in the months before he made his offer, declining from $71.69 on July 23, 2021 to just $32.42 on March 7, 2022. After Musk agreed to buy Twitter for $54.20, the stock market experienced a decline. The market decline, however, did not affect Twitter’s stock price. After the announcement of the Buyout, stock consistently traded close to the Buyout price, and around $50 per share. The small delta between its trading price and the $54.20 buyout price was typical of the trading prices of companies who have agreed to be acquired, characterized by a small discount for the time value of money and a relatively small risk that the deal will not go through. . . .

Well, this is a very solid attempt -- to hold him to his word. I suspect though, he will say. . . "I explicitly put in the $1 billion kill fee. I'll just pay my one billion bucks, and take a walk."

Still -- he might have to settle this case, for at least a few hundred million additional bucks, beyond the $1 billion. This is so, since he clearly knew he was bidding on an unknown, black box -- and with the aid of the best bankers and lawyers in the world -- settled on waiving the right to "kick the tires," before buying.

Should be... entertaining -- if nothing else.

Be excellent to one another. Out, into the late afternoon sunshine. . . bike rides by the lake! Then steak tacos, from the local truck. . . grin.

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