As for that bid, the time for due diligence is before, not after, one signs the merger agreement.
FWIW I have shares in Twitter and would prefer them to remain a publicly traded company.
now assume twitter lied in those filings
Why should we trust that they are being honest?
So did they lie about the bots? Who knows? Do they always tell the truth? Well, I think you could reasonably argue not quite.
So the argument wouldn’t be that they lied. It would be that the information they provided wasn’t useful to gauge the true scope of the “bot problem” on Twitter - at best it’d be misleading by omission, which is almost certainly not illegal given what publicly-traded companies do all the time. (Making truthful statements and being fully transparent with all facts of a business are clearly not the same thing.)
Part of the reason Twitter is so hesitant to put some number on bots is because we’d first have to agree on how to define it exactly and how to measure it objectively. If someone uses the API or third-party app or integration to interact with Twitter, how do you prove they’re not a bot? Twitter’s definition avoids that by focusing on people who can see ads on the website and if you’re actually visiting the website proper (or using an official app) you’re much less likely to be a bot to begin with.
But honestly, all this stuff is just a distraction anyway. The SEC statements were there for years and if he doubted it this could have come up during due diligence. He only is making a stink about it now because a) he wants to get out of the deal at the quoted price and b) he wants to embarrass Twitter in the process. In fact, it seems to me this whole thing from the get-go was an exercise in the hopes of uncovering evidence of something salacious regarding “censorship” and various posturing around it. There never appeared to be any realistic and serious plans to address the issues at hand, just to gesticulate wildly about it in front of the press. I think those truly concerned about the problems being discussed should have hoped for better from this whole thing.
The bid gave Musk access to inside information.
> the time for due diligence is before, not after, one signs the merger agreement.
I bought a house. The due diligence period to inspect the house, get a survey, etc. was after we entered into the contract and before closing.
I know with the crazy housing markets, this might not be something anymore, but in times past you would enter into a CONDITIONAL contract and set the price, with the stipulation that the inspection has to be satisfactory to remove the conditions. Otherwise, after you signed your contract, the house is yours, and the survey just tells you what you are obligated to fix.
Also, Business deals usually allow parties to enter into things like NDAs for due diligence, as well as signing things like Memos of Agreement to get a roughed out deal, pending a thorough due diligence. I believe he's past (or waived) the due diligence. I'm sure there is a back-out clause, but that has $$$ attached and he's trying to wiggle out without paying, is what it seems like.
Right, because thats what you included in your offer contract. Now, imagine that you didn't have anything in your offer about contingent on inspection. Do you think you would have standing to back out of the deal?
And many people, just like Musk, waive their right to terminate the contract due to inspections, loan approval, etc. For the same reason that he did - it gives the seller less reason to reject your offer.
There are two whole sections from Section 4.1 through Section 5.11, comprising 16 pages of representations and warranties, which incorporate a wide swath of statements (including public disclosures to shareholders), not to mention two pages of conditions, etc. including specifically:
> Section 5.5 Information Supplied. None of the information supplied or required to be supplied by or on behalf of Parent or any of its Representatives expressly for inclusion or incorporation by reference in the Proxy Statement shall, at the time it is first mailed to the Company’s stockholders and at the time of the Company Stockholders’ Meeting to be held in connection with the Merger, contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
It says right there ~"if Twitter has been lying to its shareholders I can void the contract."
If Twitter has been lying to its shareholders, then senior leadership is already in trouble and may be going to jail, but there's no evidence of that.
> Section 6.4 Access to Information; Confidentiality. Upon reasonable notice, the Company shall (and shall cause each of its Subsidiaries to) ... furnish promptly ... all information concerning the business ... as may reasonably be requested ... for any reasonable business purpose related to the consummation of the transaction...
I think it makes perfect sense that any financier will ask "How many users does Twitter have?" And that entitles him to this information.
Twitter doesn’t know what it doesn’t know. It’s dropping a bot estimate that may or may not have shaky foundations. It knows it’s bot “estimate” could be low, perhaps significantly so. It knows that every point over their best estimate fuels Musk’s fears and ultimately becomes a PR and potential legal disaster.
They will have internal employee pressures to make Musk go away.
They will have political pressures to make Musk go away.
The shareholders want the offer, but Twitter hasn’t really gave a shit about them before.
The thing you quote very specifically only applies to the Proxy Statement provided to shareholders as part of the process of this specific deal. It has nothing to do with previous communications and "if youve ever lied about anything then the contract is void".
> it's not fair to suggest this was 73-page contract was an as-is agreement with no warranties express or implied
Article IV is what binds Twitter (Article V is what binds Musk). It very explicitly says this is as-is with no warranties express or implied. Section 4.25:
> Section 4.25 No Other Representations or Warranties. Except for the representations and warranties expressly set forth in this Article IV, neither the Company nor any other Person makes or has made any representation or warranty of any kind whatsoever, express or implied, at Law or in equity, with respect to the Company or any of its Subsidiaries or their respective business, operations, assets, liabilities, conditions (financial or otherwise), notwithstanding the delivery or disclosure to Parent and the Acquisition Sub or any of their Affiliates or Representatives of any documentation, forecasts or other information with respect to any one or more of the foregoing. Without limiting the generality of the foregoing, neither the Company nor any other Person makes or has made any express or implied representation or warranty to Parent, Acquisition Sub or any of their respective Representatives with respect to (a) any financial projection, forecast, estimate or budget relating to the Company, any of its Subsidiaries or their respective businesses or, (b) except for the representations and warranties made by the Company in this Article IV, any oral or written information presented to Parent, Acquisition Sub or any of their respective Representatives in the course of their due diligence investigation of the Company, the negotiation of this Agreement or the course of the Merger, or the accuracy or completeness thereof.
This is also why people offered all cash for a house even when mortgages were cheap (avoids the financing contingency).
Perhaps it's different if you're acting like an angel investor in housing, but for an average family, it's financial Russian Roulette.
1) In my state there's a mandatory seller disclosure. If the seller knew about a problem with the house and didn't disclose it on the seller disclosure you can sue them if you can prove they new about the defect and intentionally didn't disclose it, so there's at least that.
2) Home inspectors don't take legal responsibility if the inspection misses something important, they only offer to, at most, give you your money back on the inspection. So you have to be optimistic that the inspector has a clue what they are doing and can catch future problems when you rely on an inspection.
Buying a home while waiving inspection might be Russian Roulette, but I bet the odds are less than 16.7% that waiving inspection will financially kill you.
For example, a house goes up for sale, three people bid within three days of the listing. Two of them for $300,000 with inspection waived, one for $300,000 with inspection not waived. The bid with inspection not waived is never even considered. It would be irrational for the seller to take the risk associated with the weaker bid.
It's very much related to the bid. If you materially mis-represent your company then it's a valid reason to scrap the deal.
> As for that bid, the time for due diligence is before, not after, one signs the merger agreement.
That's not how it works.
Try calling Twitter: "I'm doing due diligence on you guys, could you open your books to me"?
They'll laugh at you and hung up.
The agreements is a pre-requisite of doing what "due diligence" means in this context.
"Due diligence" specifically involves looking at things that you're typically not allowed to looked at.
Things like auditing financials of the company, doing an audit of the source code, proprietary technology etc.
It requires the company being acquired to share a lot of proprietary information.
The agreement, which includes $1 billion breakup clause, is necessary to filter out people who are not serious.
> They'll laugh at you and hung up.
Sure, but we're not the richest person on the planet, Elon Musk
https://arstechnica.com/tech-policy/2022/05/twitter-board-te...
https://www.bloomberg.com/opinion/articles/2022-05-17/elon-m...
Section 5.11 (note that "Parent" / "Acquisition Sub" refers to Musk and "Company" refers to Twitter):
> Each of Parent and Acquisition Sub has conducted, to its satisfaction, its own independent investigation, review and analysis of the business, results of operations, prospects, condition (financial or otherwise) or assets of the Company and its Subsidiaries. In making its determination to proceed with the transactions contemplated by this Agreement, including the Merger, each of Parent and Acquisition Sub has relied solely on the results of its own independent review and analysis and the covenants, representations and warranties of the Company contained in this Agreement. Parent and Acquisition Sub hereby acknowledge that, notwithstanding anything contained in this Agreement to the contrary, (i) neither the Company nor any of its Subsidiaries, nor any other Person, makes or has made or is making any express or implied representation or warranty with respect to the Company or any of its Subsidiaries or their respective business or operations, in each case, other than those expressly given solely by the Company in Article IV; and (ii) neither Parent nor Acquisition Sub is relying on any express or implied representation or warranty, or the accuracy or the completeness of the representations and warranties set forth in Article IV, with respect to the Company or any of its Subsidiaries or their respective business or operations, in each case, other than those expressly given solely by the Company in Article IV.