No Elon, you can’t do that.

Agreements of sale are sacrosanct

When my father died, we moved into his house for a few years while we tried to get our act together to purchase the old family homestead. The international credit crisis and a slew of failed deals put those dreams to rest. The estate was short of only one house being disposed of, for it to be wound up and distributed.

I reluctantly agreed to facilitate the sale of the house. In short order a purchaser was found and an agreement struck. The deal was subject to suspensive conditions that bank finance was approved and the sale of the purchaser's old home. I wasn't keen to find myself having to move within days into an unknown new home. So I negotiated that the buyer would take possession "at the end of the calendar month after the calendar month in which the conditions were satisfied."

So we would have at least a month to get our lives in order. As it happened, the conditions were satisfied in the first week of a month. The new owner told me he wanted to move in the following week. I reminded him of the agreement. "but you must negotiate," said he. "No, we have done that. Unless you are prepared to compensate us for varying the agreement, we will move out at the the end of next month." 

Agreements are sacrosanct. If they were not, the whole commercial system would collapse.

Twitter agreement of sale

On 13 April 2022 when Musk made the original noises about buying 100% of Twitter he mentioned the deal being contingent on financing and a due diligence.

The Proposal is non-binding and, once structured and agreed upon, would be conditioned upon, among other things, the (i) receipt of any required governmental approvals; (ii) confirmatory legal, business, regulatory, accounting and tax due diligence; (iii) the negotiation and execution of definitive agreements providing for the Proposed Transaction; and (iv) completion of anticipated financing.

For some reason, there seemed an unseemly rush to get to the negotiating table, and so on 21 April he came crashing back into the party, brandishing letters of commitment triumphantly.

His submission to SEC also pretty much said the due diligence was no longer required. He waived that right.

The Proposal was (and remains) non-binding and, once negotiated and agreed upon, would be conditioned upon, among other things, the: (i) receipt of any required governmental approvals; (ii) confirmatory legal, regulatory, accounting and tax due diligence; and (iii) negotiation and execution of definitive agreements providing for the Proposed Transaction. At the time of delivery, the Proposal was also subject to the completion of financing and business due diligence, but it is no longer subject to financing as a result of the Reporting Person’s receipt of the financing commitments described below and is no longer subject to business due diligence.

On 25 April, the agreement was finalised and signed. The due diligence requirement was specifically removed in that there is no reference to those words in the agreement in any manner at all.

Twitter deal on hold

Just over two weeks after signing the agreement Musk tweeted: “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.”

But that’s not a thing, Elon. If you agree to purchase something at a price you came up with, particularly when your advance was uninvited and unwelcome, you gotta buy the thing and pay for it. The time to negotiate about these particulars is past. I would add that I remember one of the reasons for wanting to buy Twitter in the first place was to deal with all the bots and spam accounts.

You can always put negotiations “on hold” prior to signature while you wait for clarification to help you sign at a price, or not at all. But once you have signed as one of the parties “who will make a reasonable best effort to consummate and make effective” the agreement, that’s what you gotta do.

Let me remind you that Musk had been buying up shares since January, and got to 9.2% of the total Twitter shares by 4 April when he went public with his activity. There followed a few days of “on the board” – “off the board” activity before he made an offer for everything.

Then, to my mind at least, he pushed like crazy to have “April 20” (4/20) as the date of all his funding commitment letters. There followed a weekend, and he signed a merger agreement on the following Monday. He was in such a rush to get things in the bag that he waived his right to a due diligence of the company.

He also made many public statements about the poor manner in which Twitter was managed, the extreme number of bots and spam accounts, and that “the economics of Twitter are not important to me.”

Suck it up Elon.