I don’t care if you love or hate Elon Musk, what you can’t accuse him of is being boring. It seems every other day he does some newsworthy stuff. Let’s see what he has been up to with his Twitter (X) business.
Suing the lawyers that forced him to buy Twitter
This time around it’s Elon Musk doing the suing. Who is he suing? – the lawyers that forced him to buy Twitter.
See, at the last minute, Musk tried to back away from buying Twitter as he had committed to. He cited Twitter’s bot problem as the major reason he was thinking twice.
When he tried to slink away, then-Twitter executives engaged a top law firm in the USA, Wachtell, Lipton, Rosen & Katz, to help them make sure he did no such thing. You already know what happened, Musk ended up paying $44 billion for Twitter.
PS: Twitter is worth around $20 billion today, less than half of what Musk paid.
Musk is suing those lawyers now. What for? – he says they charged excessive fees for their work in forcing him to complete the Twitter acquisition. They charged $90 million for about 4 months work.
See, the Twitter executives at the time knew they were out of the door the moment Elon took over the company. So, they were not inclined to negotiate any fees down, one could argue they were actually incentivised to leave Elon with a huge bill as a present.
Elon was in a terrible position. The people who knew he was going to fire them were still in charge of the company he was about to take over. They could bind his company to ridiculous contracts knowing he would have to deal with it after the takeover was complete.
Elon says the law firm took advantage of this and charged excessively for their services. He says, “Wachtell arranged to effectively line its pockets with funds from the company cash register while the keys were being handed over.”
Elon’s case
Elon has a case. The Twitter executives at the time did not care so much so that they didn’t even contest the $90 million dollar fee. That is despite them knowing it was ridiculous as an email by one of the directors at the time shows. She exclaimed, “O My Freaking God,” when she saw the bill and yet they approved it without question.
The complaint by Musk states,
During the first few months of its engagement, Wachtell submitted massive invoices to Twitter that included millions of dollars in hourly billings by Wachtell partners with completely blank time entry descriptions…
This was against Twitter’s policies but the former executives approved the invoices. Of course they did, many of us would have.
Most of the $90 million was actually in the form of a success bonus that Wachtell got because they forced the sale. That’s standard. What’s not standard is the fee charged or the fact that the success bonus was not in the original agreement but was tacked on after the fact. And yet former Twitter executives did not even question it.
To make it even spicier, the former executives made sure to pay the $84 million balance on the day of the acquisition just ten minutes before the merger was finalised. See, the executives knew they would be fired once the merger was finalised and so made sure the last thing they did in office was to pay that bill.
Uphill struggle
Elon still might not win even though anyone with a brain can clearly see what happened here. The major case against him is that the former executives owed their loyalty and fiduciary duties to the shareholders that Musk took over from.
In doing this, they secured a big payday for those shareholders because Musk had offered more than market value for Twitter. At the time Musk tried to pull out, Twitter was worth about $30 billion and so forcing Musk to pay $44 billion was absolutely in the best interests of the former shareholders.
That will be Wachtell’s defence too. The $90 million they charged is nothing when compared to the $14 billion of above-market value they secured for the former shareholders.
The other major thing working against Musk is that Wachtell is a really good law firm, meaning they are more than capable of defending themselves, even from a loser of a case.
It’s crazy. We shall see what becomes of this story. Fun times indeed.
X marks the spot
Musk announced that Twitter would be renamed to X and he wasn’t joking. Indeed it’s now X. The web app now displays an X symbol as opposed to the blue bird we were used to.
Why tho? I honestly believe it’s Elon on his troll roll. He has reasons but I don’t get it. Musk has said that the renaming is part of a broader effort to transform Twitter into a “platform for free speech”. He has also said that the new name is more “generic” and “future-proof” than the old name.
I don’t know what he’s talking about but he seems sure of this move, so who am I to question it? It looks like billionaires can chuck away brand names worth billions like it’s no big deal.
I don’t understand it but I hope he keeps it coming. It’s one heck of a show watching what this man does with his billions.
Also read:
When govts and citizens wage Twitter wars – can we learn anything from Saudi Arabia?
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