The Twitter and Elon Musk affair is turning into the story of a jilted bride, who initially played hard to get, and a would-be groom who claims to have peered behind the veil and decided he is better off alone. After originally spurning the advances of the Tesla billionaire, Twitter's board agreed to a $44 billion sale when they evidently realized no other suitors would be so generous. Now Musk has walked away, Twitter is suing.

Its goal, described in legal documents published on Twitter by Bret Taylor, Twitter's chairman, is to "compel consummation of the merger" – in other words, force Musk to buy Twitter for the sum he promised of $54.20 per share. Twitter's closing price yesterday was $34.06 and it has fallen 31% since Musk made his offer, so the cold feet are perhaps no surprise.

This, however, would not be a defensible excuse for terminating the deal and it is not why Musk says he has lost interest. Instead, he claims to have been misled by Twitter about the percentage of users who are not people but "spam bots" – essentially tweet-generating software. Twitter, in disclosures, says it is 5%. Musk insists the figure is "wildly higher."

Figure 1: Twitter's share price this year ($) (Source: Google Finance)

Yet as Twitter highlights in its legal documents, Musk was aware of the bots problem well before he offered to buy Twitter, and nowhere did he say that too many bots would be as much of a deal breaker as John Ruskin's wedding night (the Victorian writer was apparently so distressed by the sight of his wife's naked body that he went off sex forever, with no one seemingly bothering to find out what Mrs Ruskin thought of John sans jockstrap).

On the contrary, Musk was tweeting on April 21, days before signing the paperwork, that "if our Twitter bid succeeds, we will defeat the spam bots or die trying!" If the actual figure were 20% (Musk's estimate, according to some press reports), rather than the 5% Twitter claims, the company could find itself in a legal quagmire. But why would it have caused Musk to lose his libido? Based on Twitter's end-of-March figures, it would be the difference between 183 million and 218 million real users. Put another way, Twitter is either 9.6% or 11.5% the size of Facebook – a variance hardly very material.

Canceling the free-speech mission

Sure, a drop of 35 million accounts might sound big, and yet Musk does not seem to be querying revenue and profitability. Isn't the inference that Twitter makes more from a typical user than he previously thought ($6.56 in sales per customer for the first quarter rather than $5.50)? Could Musk's new and improved algorithms eliminate those bots once and for all? If his overhaul is so compelling, wouldn't Twitter quickly surpass 218 million users anyway and make spam a non-issue?

Like other Musk ventures, this deal was never promoted in terms of the usual business considerations. People looking to make a healthy return in unsettled times do not talk about colonizing Mars or spending $30 billion on satellite connectivity when so many satellite ventures have collapsed. In the case of Twitter, Musk's professed priority was to protect free speech, a not-very-marketable concept in the age of cancel culture and corporate virtue signalling. Turning Twitter profitable (it lost $1.36 billion in its last two fiscal years) seemed an afterthought.

Even so, Musk did not become the world's richest man by throwing money at projects with no commercial merit. Overly impulsive, he will have realized in recent weeks that millions of netizens do not share his zeal for unfettered commentary, and that his plans would probably hit government resistance in some countries. He had personally committed $33.5 billion to the bid, Twitter's board points out, but the value of his stake in Tesla, the main source of his wealth, is said to have dropped by $100 billion since November last year.

Want to know more about 5G? Check out our dedicated 5G content channel here on Light Reading.

"So Musk wants out," grumbled Twitter this week. "Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter's stockholders … Since signing the merger agreement, Musk has repeatedly disparaged Twitter and the deal, creating business risk for Twitter and downward pressure on its share price."

However this plays out, Twitter seems likely to suffer. A protracted legal fight would be a distraction for the company and potentially damaging to its brand. The social media world is already in flux, as shown by Facebook's attempted pivot to the metaverse. How a website that deals in one-line, emoji-ridden ejaculations would fit into that virtual-reality hellscape is unclear. But with TikTok, Helo and other social media sites deliberately targeting tomorrow's earners, Twitter has enough to worry about already.

Related posts:

— Iain Morris, International Editor, Light Reading