REGRET: Elon already regrets buying
Twitter and it’s not surprising why. According Elon himself, the current market value of Twitter
is less than half of the $44 billion that he paid to buy the company. This means that he has lost
over $22 billion with Twitter before even owning it for a single year. That’s the same as losing
$2.4 billion every single month since the purchase and that’s just the loss in market value. Twitter
itself was already burning money when Elon took over, so it’s likely that Elon has lost even more
money running the company as well. Zooming out, this really doesn’t matter for someone like Elon
Musk given that he’s still up nearly a hundred billion dollars year to date thanks to Tesla and
SpaceX but despite this, it’s not surprising that Elon still feels like he got the short end of the
stick. In fact, he’s so salty about the deal that he’s trying to sue the Twitter lawyers who forced
him to complete the deal. You see, when Elon Musk started trying to back out of the Twitter
deal an year ago, Twitter went out and found the best lawyers they could which turned out to be a
firm called Wachtell, Lipton, Rosen & Katz. As we now know, this law fim was indeed successful
at getting Elon to follow through with his offer but in return they charged Twitter $90 million for
essentially 4-5 months of work. Twitter’s own staff itself were stunned when they saw this
fee. In fact, a Twitter director named Martha Lane Fox would email the general counsel quote
“O My Freaking God” after seeing the fee. But, while the fee was indeed exhorbitant, this didn’t
really matter for Twitter’s original executive team because, they weren’t the ones paying the
bill. This bill didn’t come in until after Elon had agreed to buy Twitter again, so ironically,
it was Elon who had to pay the lawyers that forced him into the deal. It’s no wonder why
he’s so butt hurt but does Elon actually have a chance at winning this case and recouping his $90
million or is Elon just about to burn even more money on legal fees trying to win this lawsuit.
THE CASE FOR ELON: The case for Elon is pretty straight
forward. It breaks down into two parts with the first part centering around Twitter’s executive
team. Essentially, he’s arguing Twitter’s executives did nothing about the ridiculous
bill because well they weren’t the ones paying the bill. So, they weren’t exactly motivated to act in
Twitter or Elon’s best interest. In fact, paying these lawyers $90 million was just one of the
executives’ many lavish expenses as they headed out. So, in that context, all of Twitter’s actions
before Elon’s takeover should be questioned because the people in charge simply didn’t care
about the final outcome more than just winning the lawsuit. They were essentially lame ducks who were
collecting their last paychecks before they were gonna get fired. When you really think about it,
by fighting Elon Musk and forcing him to close, these executives were literally putting themselves
out of really good job. So, it’s safe to assume that they would not only be unmotivated to work
in Elon's best interest but that they were actively resentful against Elon. Don’t forget,
Twitter didn’t even want to sell themselves to Elon. In fact, they were actively trying to avoid
getting acquired by using things like the poison pill. The only reason they eventually agreed to
the acquisition is because Elon’s offer was just so stupidly high that they would open themselves
up to shareholder lawsuits if they didn’t take the deal. And now Elon was trying to get a lower
price by threatening to back out of the deal and they were the ones who had to fight for
Elon to close? Yeah, it would more surprising if these executives weren’t pissed off. So, Elon is
attempting to argue that the actions of these executives were not only reckless and actively
not in Twitter’s best interest. The second part of Elon’s argument claims that Wachtell leveraged
this situation to get away with ludicrous pricing. There’s really no question about
this. In terms of hourly billing itself, Elon claims that the Wachtell charged Twitter $15.6
million. Many of these billing invoices didn’t even have proper time entry descriptions. In fact,
they were completely blank. Yet, Twitter paid them anyway. The likely reason for this was that simply
that the hours were probabaly unreasonable even with a massive hourly fee. Wachtell pulls in a
whopping $3.86 million in revenue per lawyer per year. Given that the average lawyer bills around
1900 hours per year, we’re looking at an hourly fee of about $2000. Twitter likely went for the
best lawyers at the firm, so their hourly fee was likely a higher but they did get a 15% discount,
so we’ll just assume an hourly fee of $2000. This means that to rack up $15.6 million dollars worth
of hourly fees, Wachtell charged twitter for roughly 7800 hours of work all within a matter
of 18 weeks. In other words, Wachtell is basically claiming that they were consistently putting
in over 400 hours of work every week to defend Twitter. I don’t know about you but Elon feels
that this itself is completely unjustifiable. But that doesn’t even encompass the vast majority
of the $90 million fee. You see, most of the $90 million was charged to Twitter after Elon agreed
to buy Twitter as a sort of “success fee”. The only problem with this success fee was that it
was never mentioned in the original deal and it seems that Twitter’s executives were well aware
of this considering their reaction. But despite this, paying the invoice was literally the last
thing they did presumably in a screw you type of manner. In fact, the wire payment was completed
just 10 minutes before Elon closed the deal and the executives were fired. So, the evidence does
suggest that there may have been some bad faith from the Twitter team. And this is what Elon is
really trying to hammer in on. Wachtell was over here handing out invoices that didn’t
even have proper hours and charging unagreed upon success fees in the tens of millions. Meanwhile,
Twitter didn’t even question a single invoice. In fact, they made sure that they were paid before
Elon tookover but this doesn’t mean that Elon has a victory in the bag by any means.
THE CASE AGAINST ELON: For starters, Twitter’s executives
aren’t required to have any sort of loyalty to Elon whatsoever. They worked for the public
shareholders and their only job was to maximize profit for shareholders. From this perspective,
they did exactly that even in situations when they didn’t want to. They didn’t want to agree to
Elons takeover offer in the first place but they did because that was in the shareholders’ best
interest. Similarly, when Elon wanted to back out of the deal, Twitter’s executives probably didn’t
want to fight him but they did because that was in the shareholders’ best interest. And at the end of
the day, Twitter’s executives not only made sure that the acquisition was completed but that it was
completed for the stupidly high price the Elon originally offered. So, from that perspective,
Twitter’s executives never came short on their duties to the shareholders. The only
party that they arguably came up short with is Elon, someone they have no contractual obligation
to act in the best interest of. And as for the law firm, though their fees are indeed ridiculous,
you already know how they’re gonna argue their case. They’re not gonna try to defend the idea
that they were actually working for over 400 hours every week. They’re gonna argue that it’s
not about how much time they spent but rather how much value they bring. Around the time that
Wachtell got involved, Twitter was hovering around a market cap of $30 billion or $14 billion less
than what Elon had agreed to pay. This means that by getting involved, Wachtell was able to add $14
billion worth of value to shareholders for which a $90 million fee is miniscule. It’s only 0.6%. Now,
Elon could of course argue that they didn’t have to do much to actually close the deal.
Elon had agreed to a specific performance clause meaning that if Twitter met certain thresholds,
Elon had to go through with the acquisition. In other words, he couldn’t just back out and pay a
penalty. So, really Wachtell didn’t even have to convince Elon to go through with the deal. All
they had to do was disprove Elon’s little fake bot argument and prove that Twitter did indeed
meet the thresholds outlined in the original offer. Obviously light work for $90 million but
that’s not Wachtell’s fault. That’s Elon’s fault for one, signing a deal that was hard to back out
of and then two, threatening to back out anyway without a strong case. Wachtell has nothing to do
with any of that. As far as they’re concerned, their job is to help shareholders realize $14
billion in lost value and that’s exactly what they did. Again, their job is not to act in Elon’s best
interest. Moreover, it’s not like Elon is suing another billionaire or another company who may
have made some missteps along the way. They’re literally suing a straight up law firm. Common
sense would tell you that sure a law firm might do things that are shady or even unjust but you
can be sure as hell that it’s legal. Here’s the thing, this isn’t Wachtell’s first rodeo. They
specialize in mergers and acquisitions and naturally one party or the other gets mad at
them on a regular basis like Carl Icahn did back in 2012. If you’re not familiar with Carl Icahn,
he’s one of the most infamous corporate raiders of all time. And during one of his corporate raids,
he realized that one of the companies that he was raiding was using none other than Wachtell.
And guess what, they were charging a success fee. If Icahn’s raid succeeded, the company was on the
hook for $36 million. If it failed, they only had to pay $18 million. Icahn was obviously outraged
after seeing this and decided to take Wachtell to court but guess what happened. The case would
just end up dragging on for 6 years after which Icahn would end up losing. So, if history is any
indication of how suing over success fees ends up, well it’s not looking too great for Elon.
THE FATE OF TWITTER: As you can see, Elon has a decent case
from a what’s fair type of perspective. There’s no question that Wachtell charged Twitter as much
as they possibly could and Twitter was more than happy to be these fees just to spite Elon. So,
it seems fair that Elon should get a refund on much of these legal fees. But see,
what’s fair and what’s legal aren’t always the same thing. Sure, when you look at it from the
perspective of, Wachtell got paid $90 million just to disprove Elon’s little bot claims and
finish up the acquisition, it’s a stupid amount. But, when you look at it from the perspective of,
Wachtell ensured shareholders got the $14 billion worth of cash that they were promised,
$90 million isn’t all that crazy. Similarly, you can blame the Twitter executives all you want for
acting in spite as they probably did. But, they only acted in spite against Elon not against the
shareholders which is who they’re supposed to be loyal to. Also, think about this: Elon would’ve
never been in this position in the first place if he didn’t try to back out of the deal. If he truly
was worried about the Twitter bot population, he should’ve cleared up those concerns before
signing a $44 billion deal to buy the entire company. Considering all of this and the fact
that Wachtell has already successfully defended themselves in a similar situation against another
rich billionaire, it stands to reason that Elon probably wont be getting a refund and even if he
does, it won’t be anytime soon and it won’t really make a difference to Twitter’s survivability.
So, maybe it would be a better idea to focus on turning around Twitter instead
of wasting time on a lawsuit but that’s just what I think. Speaking of Carl Icahn,
he’s actually facing some massive ponzi scheme allegations. Check out this video to learn more.