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Point/Counterpoint: Elon Musk fiasco exposes Twitter's need for leadership

From the column: "Musk's behavior seems erratic, but at this juncture, he probably wants to exercise the option of time. He wants to stall."

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Elon Musk wants out of the $44 billion deal he struck with Twitter, or so it seems. The easy and possibly less expensive option would be to pay the $1 billion exit fee written into the contract. Instead, he's letting Twitter take him to court. Pay close attention to what happens in the coming weeks because this is undoubtedly not the end of the story between Musk and Twitter.

Musk's behavior seems erratic, but at this juncture, he probably wants to exercise the option of time. He wants to stall.

From the column: "Musk's high-profile battle to acquire, and now to avoid acquiring, Twitter should serve as a reminder of the downsides of centralized social media."

Back in April, Musk made a formal offer for Twitter. Then in May, Musk's tenor began to change. He claimed that spam bots and fake content were far more widespread than he was led to believe. He wrote: "20% fake/spam accounts, while 4 times what Twitter claims, could be much higher. My offer was based on Twitter's SEC filings being accurate."

Through May and into all of June, Musk took to the platform to criticize it. He continued to press Twitter for its fake content and spam accounts.

Then, earlier this month, Musk filed the paperwork to cancel the deal. According to Musk, the company "made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement."

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But Twitter's leaders aren’t having any of it. They are committed to finalizing the deal, and they fired back with an extended letter putting the issue in the courts.

It seems odd that Musk made a legitimate offer in April but now wants out. Even more confusing is the option he didn't take. Musk could have gotten out of this pickle by formally calling off the deal entirely and taking the loss. But it wouldn't be cheap. As stipulated in the original agreement, Musk would have had to pay that $1 billion breakup fee.

Musk is trying to negate the entire deal by claiming that Twitter misled him. In particular, he has needled the company on their spam and fake accounts claims.

Unfortunately for Musk, the standard is high for these cases, which means Musk isn't likely to win. But there still might be something to his claim. Every day, a group within Twitter selects 100 random accounts and reviews them to see if they are bots. Musk wants access to the raw data, which Twitter has yet to release.

Still, if the spam and fake accounts were a problem, Musk should have gotten it sorted before a formal deal was inked. This is why lawyers go into rooms with other lawyers and hash out the specifics of a deal before it is announced. At this point, it is probably too late.

In all likelihood, Musk will have to go through with the sale. So, the move to strike the deal is probably a stalling tactic. He might be able to get Twitter down in price in the next couple of months before the case is heard.

Musk laid out the problem when this all started: "Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy. What should be done?"

He then said that two paths were possible for Twitter. Either the company needed to be bought or it needed a competitor. Musk was able to cobble together funding in just days, suggesting that there is investor appetite for another competitor in the space.

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Musk has exposed the soft underbelly of social media.

Musk shows why the heavy hand of legislation isn't needed regardless of what happens in court. What the company has always needed has been leadership.

Will Rinehart is a senior research fellow with the Center for Growth and Opportunity (thecgo.org) at Utah State University in Logan, Utah.

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Will Rinehart

Related Topics: SOCIAL MEDIA
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