Musk Considered Launching His Own Social Network App Before Twitter Bid

From nearly the beginning, Elon Musk wanted to buy Twitter—not just sit on its board or remain a large, silent shareholder—and he considered starting a competing service before ditching the plan to concentrate on a buyout, according to new details about the proposed $44 billion transaction offered in an SEC filing.

The filing, a proxy statement that comes from Twitter’s board and urges shareholders to approve Musk’s acquisition, sheds some light on his initial pursuit: Musk really wanted to buy Twitter! And he’s been thinking about it for longer than we’d known. Like so much else, what’s revealed in the proxy only complicates the very latest state of affairs—with Musk possibly not buying Twitter after all (despite having thought about it for a good while). He says the deal is off unless Twitter can prove its statements about spam and automated accounts—while Twitter insists the deal should go forward using the agreed $54.20-a-share price.

Okay, let’s talk about what we learned from the proxy. After Musk started to accumulate what would be a more than 9% stake in the company, he met with Twitter CEO Parag Agrawal and chairman Bret Taylor on March 27 and told them he had amassed this large shareholding. Further, he said, he was mulling a number of options for his next move: start a rival service, join Twitter’s board or acquire Twitter outright. Musk quickly scrapped the idea for a competing app. (Smart. As President Trump has found out of late, doing so is tough.) And he didn’t want to join the board either. He accepted a directorship, then turned it down a few days later. In rejecting the seat, he told Twitter he intended to buy the company. Which leaves us with option three—acquire Twitter.

Until now, it’s been unclear when Musk decided to pursue an unsolicited takeover, but the proxy makes it apparent how long it’s been on his mind. Externally, Twitter didn’t let on much about what it knew about Musk’s plans. In public comments about Musk and his discarded board seat, Agrawal warned employees and shareholders of “distractions ahead.” (Distractions! Seems like an understatement through the lens of hindsight.) Agrawal didn’t mention that Musk had already informed him and Twitter’s board about his plans to buy the company. Internally, however, the specter of a Musk acquisition consumed the board’s attention and seemed to factor into every part of how it dealt with him from the start, including it offering him a board seat and trying to limit the amount of Twitter stock he could continue to buy.

Another thing the proxy tell us: Musk and Twitter cofounder Jack Dorsey have been close confidants throughout this, even closer than what we’ve gathered from their tweets back and forth. They’re buds! And no, this isn’t a cutesy exaggeration. The proxy actually says that. Here it is, on page 43: In an April 3 board meeting, “Mr. Dorsey informed the Twitter Board that he and Mr. Musk were friends.” Their relationship has been a source of complication for Twitter during this process—with Dorsey publicly advocating for Musk to privatize the company and criticizing the board (on which he still sits) before the directors voted to approve Musk’s offer. As it turns out, Dorsey was the first person Musk contacted about Twitter (that happened on March 26), and in another conversation, Musk asked Dorsey to reverse plans to leave the board in May. Dorsey declined and, at the same time, told Musk that Twitter would be better off as a private company. Four days later, Musk informed the board he intended to privatize Twitter.

To recap: Musk and Dorsey, they’re friends! And their friendship is at least partly what fueled Musk’s interest in Twitter—we sorta knew this before the proxy, but it really clarifies it—even if Musk’s interest in Twitter hasn’t always seemed like the absolute best thing for Twitter.

Here are some other interesting tidbits from the proxy, and then we’ll neatly get back to what else happened Tuesday morning:

• Musk passed his background check! There was some light internet speculation that maybe something came up during the check conducted by Twitter when it thought he was joining the board. Maybe some previously unknown SEC investigation—which might’ve played into Musk reversing course on joining the board. Nope.
• Twitter didn’t make much of an effort to find itself a so-called white knight. On April 14, a day after Musk publicly revealed his plans to buy Twitter, the Twitter board met with its Goldman Sachs bankers and decided not to pursue “strategic alternatives” to a Musk sale. (By that, they mean, “Find ourselves another buyer with whom we can live with more easily.” In other words, a white knight.) Why didn’t Twitter formally solicit other offers? In a grim reflection of Twitter’s business prospects, the bankers and the board concluded: “That other parties were unlikely to have the interest in, or capability to, acquire Twitter,” the proxy reads. That is, no one else other than Musk would be willing to buy Twitter right now.
• By the time Musk showed up, Twitter already knew it was falling short of goals set last year to get revenue to $7.5 billion by 2023. Internal projections showed the company landing at $7.2 billion, which would nonetheless still represent substantial growth from $5.1 billion in 2021 revenue. Twitter has forecast revenue climbing to $10 billion (2025) to $12.9 billion (2027). Musk reportedly has thrown out much more ambitious goals in pitching potential co-investors in the deal. According to the New York Times, he thinks he can get Twitter revenue to $28 billion by 2028, $12 billion from advertising sales, $10 billion from subscriptions products. Right now, Twitter’s revenue is almost entirely from ads.
• A final bit from the proxy that you have to kinda smirk at, given how it’s positioned. The document has a section titled “Recommendation of the Twitter Board and Reasons for the Merger,” which is where the board lists the reasons why it thinks shareholders should approve the deal. Among other factors, they include Twitter’s past struggles to simultaneously grow users and revenue; the bankers’ conclusion that $54.20 is a good price; lack of interest from anyone else; and reasonable likelihood of consummation. The belief of the Twitter board that an acquisition by Mr. Musk has a reasonable likelihood of closing.”

It’s funny to see “reasonable likelihood of consummation” written out since—well, the deal seems a whole lot less likely to get consummated today than it did a week ago. (At least at $54.20 a share.) And here we return to the very latest events.

Hours before Twitter released that proxy statement Tuesday morning, Musk said the deal can’t happen until the company shows him proof for its estimate that less than 5% of Twitter accounts are spam. Musk has made fighting spam—bot accounts—one of his preferred talking points, and on Friday, he said he was pausing the deal until he further analyzed the company’s spam estimates, which have been included in SEC filings for several years.

At a technology conference on Monday, Musk said he believed the number was possibly as high as 20%. Meanwhile, Agrawal on Monday issued a lengthy Twitter thread outlining the company’s actions against bots and again said the number was below 5%. Musk responded to Agrawal’s comments with a poop emoji.

Yeah, Musk, the guy who has been thinking about buying or competing with Twitter for longer than we’ve known, may be changing his mind about buying Twitter. He seems to be positioning bots as a pretext for walking away from the deal—though he’d be on the hook for a $1 billion breakup fee if both sides agree to call off things—or as a pretext to force Twitter into renegotiating the $54.20 share price amid the recent downturn in tech stocks.

Twitter could choose to do neither of these and instead drag Musk into court to force him to make good on his signed agreement with the board to buy the company. If the board thought $54.20 a share looked good in April, it looks even better in May after that slide in share prices across the industry. In a press release about the proxy, the company said: “Twitter is committed to completing the transaction on the agreed price and terms as promptly as practicable.”

Twitter investors aren’t psyched about what’s going on. The stock sank a further 0.6% in early trading Tuesday after falling nearly 7% on Monday. The increasing gap between the share price and Musk’s offer—it had narrowed to only a few dollars a couple weeks ago—signals that investors increasingly fear the deal won’t happen.

It’s all pretty ironic. A few weeks ago, Musk really wanted to get this done, and Twitter didn’t. Now, a cold-footed Musk seems less into it, but Twitter really wants to get it done. Why? It told us why right in the proxy: “If the merger is not completed, and depending on the circumstances that cause the merger not to be completed, the price of our common stock may decline significantly.”