The blue bird in the cage of the dark future

It seems that digital companies that rely on entertainment and social networks are also heading for an uncertain future as inflation begins to eat up their profits and people give up to preserve their savings and succumb to a possible long recession.

Twitter, which wanted to buy the world’s richest man and then gave up, faces a legal battle whose board has every chance of winning, but the group will not come out unscathed.

“This is one of the craziest economic issues I’ve ever seen,” analyst Dan Ives told AFP.

Elon Musk sent a letter to Twitter on Friday announcing that he had terminated the agreement reached in April to buy the platform for $ 54.20 per share, or $ 44 billion in total.

But Ann Lipton, a professor at the University of Tulane, says this type of contract is “designed to prevent buyers from panicking and deciding to withdraw.”

The head of Tesla and SpaceX cites arguments, including that the board underestimated the number of active non-original accounts on the platform and did not provide all the information needed to properly assess the spam problem.

Musk’s lawyers are also talking about recent retrenchments of Twitter employees and an appointment freeze, which is contrary to the group’s commitment to continue normally.

But the expert in the law of commercial disputes believes that these are not sufficient reasons.

“Musk is looking for weaknesses in the deal,” she said. “But for ‘false’ advertising, for example, it is not enough to justify that it is false, but that it largely questions the economic foundations of society.”

“From a legal point of view, it seems clear that Musk is wrong,” she added.

The possibility still exists that Musk is in fact attempting to renegotiate the price reduction.

This tactic has been used successfully with the LVMH group. Two years ago, the luxury conglomerate cut off an acquisition with Tiffany and then took a price cut.

But experts do not know what price can currently allow an agreement between Musk and Twitter, while the group’s share has lost more than a quarter of its value since April.

“Both sides have a lot to lose,” said Anne Lipton.

If Twitter wins in the courts, the businessman will have to pay several billion in damages.

In the worst case, he may have to respect the deal and buy the California group at the price set first, which is very high compared to its current value, while his wealth has declined by tens of billions in recent months.

But this victory for shareholders will leave the group and the social network in the hands of Elon Musk.

His vision does not match the vision of a large number of employees, users and advertisers on which the economic model of this service depends.

“Twitter is in a worse state than it was six months ago, but in the long run it’s better that Musk does not have it,” says analyst Carolina Milanesi of Creative Strategies.

“It would be like giving a toy to a spoiled child who no longer wants it and does not know what to do with it, and eventually forgets it in a corner,” Milanesi said. She added that the “blue bird” “will fade slowly and painfully.”

The trial is expected to take months, especially since Musk will work to delay it, according to Anne Lipton.

And she added that the businessman, who has more than 100 million followers on the platform, “will try to humiliate them and that will be a source of frustration for employees.”

He overloaded the platform with critical and sarcastic tweets and bizarre suggestions with the encouragement of many of his fans.

For Twitter, Dan Ives said: “It’s going to be a struggle on all fronts, to preserve its engineers, not lose ground, preserve its brand image and address investor questions.”

Unlike its neighbors in the technology hub Silicon Valley, the network has never turned into a money-making machine that can divert users’ attention to astronomical advertising revenue.

“Over the past few months, Twitter has not been able to focus on its business,” says Debra Williamson of eMarketer Group. “They are going to have the same problems they had before Musk.”

“User growth is slowing down. Advertising revenue is growing slightly, but the group is now facing a slowdown in the world economy affecting the advertising budgets of all social media networks,” she added.

fake accounts

In a letter published Friday by the U.S. Security and Exchange Commission, Musk’s lawyers claimed that Twitter had not fulfilled its obligations under the agreement, especially by not providing all required information about the number of fake accounts and spam.

“Twitter did not respect the multiple terms of the agreement and apparently provided false and misleading information on which Musk relied to enter into the purchase agreement,” the letter reads.

Twitter has repeatedly said in recent weeks that the number of fake accounts on its platform is less than 5%. The billionaire and his team believe that the network lies and that it affects the value and continuity of the company.

The two parties have undertaken to pay compensation in the event of the cancellation of the transaction, which in certain circumstances could amount to one billion dollars.

On the other hand, Brett Taylor, CEO of Twitter, announced on Friday that the company is “committed to completing the transaction at the price and terms agreed with Musk,” adding: “We are confident that we will triumph. “in court.

“This is a disastrous scenario for Twitter and its board, as the company Musk now has to face a long court battle to save the deal and / or get back at least $ 1 billion,” analyst Dan Ives said.

In mid-April, after gradually buying up shares in the network, the world’s richest man offered to buy Twitter at $ 54.20 a share, or a total transaction of $ 44 billion.

“I have a strong belief that a broad, inclusive platform that you can trust is very important to the future of humanity,” he said at TED 2022.

The board initially tried to reject his offer before finally agreeing to it on April 25th.

Since then, Twitter’s share has lost more than a quarter of its value. Tesla’s share fell nearly 25% during this period.

CFRA Research analyst Angelo Zino said in a note that Elon Musk’s potential “regret” while initially suggested has become “laughable”, according to the expert.

The South African billionaire received the support of very rich people and investment companies to reach the required amount, and reduce the money he had to borrow from the banks. These loans upset the market because they were loans backed by Tesla bonds.

But aside from financial considerations, events in recent weeks have shown the gap between the entrepreneur and the San Francisco-based company.

Musk calls for less stringent content regulation and the return of people who have been banned for violating the rules, such as former President Donald Trump.

His vision contrasts with the vision of many Twitter employees, associations and Democratic representatives who instead ask social media to better fight hate speech, harassment and misinformation, which serves the interests of users and democracy.

Carolina Milanesi noted that “Twitter is in a worse state than it was when it all started.” “Senior officials resigned and there was no progress (…), but the worst will be if the Twitter platform puts pressure on the takeover,” she added.

“They will end up with the owner of a company he does not want, and he has a lot of resentment,” she said.

Twitter shares fall

And on Monday, in the first trading session on the New York Stock Exchange following Musk’s decision to withdraw from the deal, Twitter closed its share at a loss of 11.3% to settle at $ 32.65 per share, 40% less than the price Musk offered to buy the company in mid-April.

Musk posted on his Twitter account earlier Monday, a tweet that was his first public comment on his decision to withdraw from the deal.

And the tweet that Musk published is about four photos of him, all of which looked like he was laughing, and next to each of them he wrote a different sentence.

Next to the first photo, Musk wrote, “They said I could not buy Twitter,” while writing next to the second, “Then they refused to disclose data related to the fake accounts,” to next to the third, “And now they want to force me to buy Twitter in court,” before concluding his comment on the photo. Fourth, by saying: “Now they need the data related to the fake accounts, in court. ”

The billionaire followed his tweet with a photo of actor Chuck Norris winning a chess match, commenting on it by saying “Chuck dead”, and using the actor’s name to spell the phrase “Chick Dead” used to indicate the defeat, distort. of the opponent.

Commenting on the pending legal battle between the two parties, the credit rating agency, “S&P”, said that regardless of the outcome of this battle, this case “increases the uncertainty and reputation risk” for Twitter.

Civilization on Mars

During an interview in which Musk talked about many things, one of the sources said that the billionaire and CEO of Tesla and SpaceX spent most of the time talking about Mars and praising the benefits of increasing birth rates on Earth. . Musk said he was trying to establish a civilization on Mars.

Musk said a few days ago that he would do everything in his power to help in what he called the “underpopulation crisis”, after a media report indicated that he had twins with the CEO of his start-up Neuralink.

Musk appeared on stage at the conference hosted by Allen & Company, the annual meeting of CEOs of media and technology companies in Idaho.

Musk’s arrival at the conference shook the event, where major events usually take place away from the curious eyes of the media.

The interview was conducted with Musk Sam Altman, CEO of OpenAl, a company that specializes in artificial intelligence research, which co-finances Musk.

A senior media official, who spoke on condition of anonymity, said before the interview: “It feels like absolute chaos … The man is making his own rules.”

The conference was dominated by a Wall Street reassessment of broadcasting in the wake of Netflix’s subscriber losses. A digital media chief said Hollywood, which is usually spared from recessions, has suddenly become concerned about how the declining economy is affecting its multi-billion dollar investment in streaming services.

“For the first time, people are realizing that the economy is really affecting entertainment companies because inflation has an impact on this disruption,” the CEO added, noting that it causes subscribers to a service to be reluctant to pay for it.

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