From practically the start, Elon Musk wished to purchase Twitter—not simply sit on its board or stay a big, silent shareholder—and he thought-about beginning a competing service earlier than ditching the plan to focus on a buyout, in keeping with new particulars in regards to the proposed $44 billion transaction provided in an SEC submitting.

The submitting, a proxy assertion that comes from Twitter’s board and urges shareholders to approve Musk’s acquisition, sheds some mild on his preliminary pursuit: Musk actually wished to purchase Twitter! And he’s been enthusiastic about it for longer than we’d identified. Like a lot else, what’s revealed within the proxy solely complicates the very newest state of affairs—with Musk presumably not shopping for Twitter in spite of everything (regardless of having thought of it for a superb whereas). He says the deal is off until Twitter can show its statements about spam and automatic accounts—whereas Twitter insists the deal ought to go ahead utilizing the agreed $54.20-a-share value.

Okay, let’s discuss what we realized from the proxy. After Musk began to build up what can be a greater than 9% stake within the firm, he met with Twitter CEO Parag Agrawal and chairman Bret Taylor on March 27 and instructed them he had amassed this massive shareholding. Additional, he mentioned, he was mulling numerous choices for his subsequent transfer: begin a rival service, be a part of Twitter’s board or purchase Twitter outright. Musk shortly scrapped the thought for a competing app. (Good. As President Trump has discovered of late, doing so is hard.) And he didn’t need to be a part of the board both. He accepted a directorship, then turned it down a number of days later. In rejecting the seat, he instructed Twitter he meant to purchase the corporate. Which leaves us with possibility three—purchase Twitter.

Till now, it’s been unclear when Musk determined to pursue an unsolicited takeover, however the proxy makes it obvious how lengthy it’s been on his thoughts. Externally, Twitter didn’t let on a lot about what it knew about Musk’s plans. In public feedback about Musk and his discarded board seat, Agrawal warned workers and shareholders of “distractions forward.” (Distractions! Looks like an understatement by way of the lens of hindsight.) Agrawal didn’t point out that Musk had already knowledgeable him and Twitter’s board about his plans to purchase the corporate. Internally, nonetheless, the specter of a Musk acquisition consumed the board’s consideration and appeared to issue into each a part of the way it handled him from the beginning, together with it providing him a board seat and making an attempt to restrict the quantity of Twitter inventory he might proceed to purchase.

One other factor the proxy inform us: Musk and Twitter cofounder Jack Dorsey have been shut confidants all through this, even nearer than what we’ve gathered from their tweets backwards and forwards. They’re buds! And no, this isn’t a cutesy exaggeration. The proxy really says that. Right here it’s, on web page 43: In an April 3 board assembly, “Mr. Dorsey knowledgeable the Twitter Board that he and Mr. Musk had been buddies.” Their relationship has been a supply of complication for Twitter throughout this course of—with Dorsey publicly advocating for Musk to denationalise the corporate and criticizing the board (on which he nonetheless sits) earlier than the administrators voted to approve Musk’s supply. Because it seems, Dorsey was the primary particular person Musk contacted about Twitter (that occurred on March 26), and in one other dialog, Musk requested Dorsey to reverse plans to depart the board in Might. Dorsey declined and, on the identical time, instructed Musk that Twitter can be higher off as a personal firm. 4 days later, Musk knowledgeable the board he meant to denationalise Twitter.

To recap: Musk and Dorsey, they’re buddies! And their friendship is not less than partly what fueled Musk’s curiosity in Twitter—we sorta knew this earlier than the proxy, but it surely actually clarifies it—even when Musk’s curiosity in Twitter hasn’t all the time appeared like the very best factor for Twitter.

Listed below are another attention-grabbing tidbits from the proxy, after which we’ll neatly get again to what else occurred Tuesday morning:

• Musk handed his background examine! There was some mild web hypothesis that possibly one thing got here up in the course of the examine performed by Twitter when it thought he was becoming a member of the board. Perhaps some beforehand unknown SEC investigation—which could’ve performed into Musk reversing course on becoming a member of the board. Nope.
• Twitter didn’t make a lot of an effort to seek out itself a so-called white knight. On April 14, a day after Musk publicly revealed his plans to purchase Twitter, the Twitter board met with its Goldman Sachs bankers and determined to not pursue “strategic options” to a Musk sale. (By that, they imply, “Discover ourselves one other purchaser with whom we will dwell with extra simply.” In different phrases, a white knight.) Why didn’t Twitter formally solicit different presents? In a grim reflection of Twitter’s enterprise prospects, the bankers and the board concluded: “That different events had been unlikely to have the curiosity in, or functionality to, purchase Twitter,” the proxy reads. That’s, nobody else aside from Musk can be keen to purchase Twitter proper now.
• By the point Musk confirmed up, Twitter already knew it was falling wanting objectives set final yr to get income to $7.5 billion by 2023. Inside projections confirmed the corporate touchdown at $7.2 billion, which might nonetheless nonetheless characterize substantial development from $5.1 billion in 2021 income. Twitter has forecast income climbing to $10 billion (2025) to $12.9 billion (2027). Musk reportedly has thrown out way more bold objectives in pitching potential co-investors within the deal. In response to the New York Occasions, he thinks he can get Twitter income to $28 billion by 2028, $12 billion from promoting gross sales, $10 billion from subscriptions merchandise. Proper now, Twitter’s income is nearly completely from adverts.
• A remaining bit from the proxy that you must kinda smirk at, given the way it’s positioned. The doc has a bit titled “Advice of the Twitter Board and Causes for the Merger,” which is the place the board lists the the reason why it thinks shareholders ought to approve the deal. Amongst different elements, they embrace Twitter’s previous struggles to concurrently develop customers and income; the bankers’ conclusion that $54.20 is an effective value; lack of curiosity from anybody else; and affordable chance of consummation. The idea of the Twitter board that an acquisition by Mr. Musk has an affordable chance of closing.”

It’s humorous to see “affordable chance of consummation” written out since—effectively, the deal appears a complete lot much less more likely to get consummated at the moment than it did per week in the past. (Not less than at $54.20 a share.) And right here we return to the very newest occasions.

Hours earlier than Twitter launched that proxy assertion Tuesday morning, Musk mentioned the deal can’t occur till the corporate reveals him proof for its estimate that lower than 5% of Twitter accounts are spam. Musk has made preventing spam—bot accounts—one in every of his most well-liked speaking factors, and on Friday, he mentioned he was pausing the deal till he additional analyzed the corporate’s spam estimates, which have been included in SEC filings for a number of years.

At a know-how convention on Monday, Musk mentioned he believed the quantity was presumably as excessive as 20%. In the meantime, Agrawal on Monday issued a prolonged Twitter thread outlining the corporate’s actions in opposition to bots and once more mentioned the quantity was beneath 5%. Musk responded to Agrawal’s feedback with a poop emoji.

Yeah, Musk, the man who has been enthusiastic about shopping for or competing with Twitter for longer than we’ve identified, could also be altering his thoughts about shopping for Twitter. He appears to be positioning bots as a pretext for strolling away from the deal—although he’d be on the hook for a $1 billion breakup price if either side conform to name off issues—or as a pretext to drive Twitter into renegotiating the $54.20 share value amid the current downturn in tech shares.

Twitter might select to do neither of those and as a substitute drag Musk into court docket to drive him to make good on his signed settlement with the board to purchase the corporate. If the board thought $54.20 a share appeared good in April, it appears to be like even higher in Might after that slide in share costs throughout the business. In a press launch in regards to the proxy, the corporate mentioned: “Twitter is dedicated to finishing the transaction on the agreed value and phrases as promptly as practicable.”

Twitter traders aren’t psyched about what’s happening. The inventory sank an extra 0.6% in early buying and selling Tuesday after falling practically 7% on Monday. The rising hole between the share value and Musk’s supply—it had narrowed to just a few {dollars} a pair weeks in the past—indicators that traders more and more worry the deal gained’t occur.

It’s all fairly ironic. A couple of weeks in the past, Musk actually wished to get this accomplished, and Twitter didn’t. Now, a cold-footed Musk appears much less into it, however Twitter actually needs to get it accomplished. Why? It instructed us why proper within the proxy: “If the merger isn’t accomplished, and relying on the circumstances that trigger the merger to not be accomplished, the value of our frequent inventory might decline considerably.”