0:04

Welcome

0:04

back to how it happened. I'm your

0:06

host for this season. Erica Pandy.

0:08

By now, you know Elon

0:10

Musk makes big moves that

0:12

often catch the world by surprise. That

0:15

happened again this week when Musk

0:18

sent a letter to Twitter declaring

0:20

that he would proceed with his offer to purchase the

0:22

platform after all. To

0:24

catch you up quick, in April,

0:26

Musk made an offer to buy Twitter.

0:29

Shortly after he tried to reverse

0:31

course. Twitter sued him to go

0:33

through with the deal and the trial was scheduled

0:35

for mid October in Delaware Chancery

0:37

Court. But just days when for the trial's

0:39

start date, Musk decided to

0:41

proceed with the sale. Off this

0:43

news, we wanted to bring you a conversation

0:46

between two our top reporters who've

0:48

covered every twist and turn in this saga.

0:51

Media reporter, Sarah Fisher, and business

0:54

editor, Dan Promach. This episode

0:56

was recorded on Wednesday, October fifth.

1:04

Hey, Dan? Hey,

1:06

Sarah.

1:07

So Dan, a lot has just

1:09

gone down. What just happened laid out

1:11

for us? The

1:12

big thing that happened is that Elon Musk

1:15

has suddenly reversed course and decides

1:17

he wants to buy Twitter again. At the price

1:19

he agreed to buy it four back in April, forty

1:21

four billion dollars. Late

1:23

Monday night, Musk's lawyers sent

1:25

a letter to Twitter's lawyers, basically saying,

1:28

I know we've been suing each other over this, but don't

1:30

worry, I am now prepared to proceed

1:32

and go forward. He also put two

1:34

conditions on that one that he actually

1:36

secures the bank financing. And then

1:38

also, that there'd be a stay

1:41

of the trial granted by the court

1:43

That's a little bit more complicated because the

1:45

court actually has to agree to do that and

1:48

both parties need to ask the court

1:50

to do that. Okay.

1:51

So the judge says that she'll continue

1:53

to press on toward the trial because

1:55

there has not been a request by Twitter.

1:57

There's not been a request by Twitter, by Elon

1:59

Musk

1:59

or any parties associated with either one

2:02

of them. Nobody's asked the court to stay this case

2:04

as of Wednesday afternoon. Okay.

2:06

So what's Twitter's reaction to all

2:08

of this? Twitter's

2:09

formal reaction has been to repeat

2:11

the same line. It has been repeating over

2:14

and over for months, which is we intend

2:16

to complete this transaction at fifty four dollars

2:18

and twenty cents per share. Behind the scenes

2:20

though, Twitter is basically trying

2:22

to figure out if Musk is trying

2:24

to screw them. In short, Twitter does

2:26

not trust Elon Musk, and they're certainly not just

2:28

gonna trust a letter that has no legal

2:31

binding to it. So they're trying

2:33

to make sure that every eye is

2:35

dotted and every t is crossed and

2:37

that the judge is signed off on all

2:39

of this. They're

2:40

trying to assure

2:41

that legally

2:43

must cannot muscle his way

2:46

out of this deal. Even

2:47

if he says, I

2:49

now agree to the deal. Think

2:50

about it from Twitter's point of view. Elon Musk

2:53

back in April said he wanted to buy

2:55

the company and he didn't just say it, he didn't just tweet

2:57

it. There's a very detailed merger agreement.

3:00

He already said he wanted to buy the company, and then

3:02

he walked away. So if you're Twitter

3:04

and you've already been burned by him

3:06

once in terms of him reversing course,

3:08

you can't put all your eggs in the basket

3:10

that this time he's gonna

3:12

follow through.

3:13

Okay. So Dan, I was planning to go to

3:15

Delaware and actually see what would happen

3:17

at this trial. Is it gonna look the

3:19

same? Is there gonna be as much momentum

3:21

around it? Is it gonna take the full five days,

3:23

what do you expect is going to happen now?

3:25

The

3:26

reality right now is we don't know if there's going to be

3:28

a trial or not. It would be fairly strange

3:30

to have a trial in which Twitter is saying

3:33

you have to complete this merger and Elon's

3:35

responses. Okay. Like, that's a

3:37

weird trial. But as of this moment,

3:39

that that's what we've got. not only because

3:41

Twitter wants to make sure that Musk

3:43

is legally committed to doing this, but

3:45

the court itself has a little bit of

3:48

need here. to maintain

3:50

its own relevancy going forward in

3:52

other similar cases. So there

3:54

is a reason for the court to want

3:56

so called specific performance, which is what Twitter's

3:58

asked looking for. It's this

3:59

legal term of art whereby somebody

4:02

who agrees to buy a company is forced

4:04

to buy the company they agreed to buy. If

4:06

you're the court, you kind of want that somewhere

4:08

on the rec because that will

4:10

serve as a warning shot for some

4:12

future acquirer. Well,

4:14

some of the craziness about it that seems

4:16

so unprecedented. was that

4:18

Elon Musk pursued this company

4:20

with such conviction, offering a huge

4:23

premium on the share

4:25

price at the time that he signed

4:27

that merger agreement. But then he started to

4:29

walk back and no one could

4:31

really tell why. Was it because he was trying to

4:33

actually back out of the deal? Was it because he was trying to

4:35

lower the price? then for him now,

4:37

right ahead of this deposition and

4:39

right ahead of the trial, to come back

4:41

and say, you know what, I'm gonna stick

4:43

to the agreement. there must have been some sort

4:45

of change in thinking. You know, maybe he didn't

4:47

want something to get out during the trial.

4:49

Maybe he just figured he was gonna

4:51

lose, and that would be embarrassing. Why do you

4:53

think he made this decision?

4:54

I think he made it because he knew he was gonna

4:56

lose. I've spoken to a bunch of friends

4:58

and kind of call them advisors to Elon

5:00

over the last couple days and really over the last couple

5:02

months, and the sense you get is that he's been

5:05

increasingly pessimistic about

5:07

his odds of winning in court And the

5:09

reality is if you don't think you're gonna

5:11

win a lawsuit, it's not worth pursuing that

5:13

lawsuit much longer first because it's

5:15

expensive. And second, It can be

5:17

very embarrassing, not just losing nobody

5:19

likes to lose, but you're talking about a case in

5:21

which there's a lot of discovery of all of his text

5:24

messages and signal messages, and maybe

5:26

even finances, I don't think anybody,

5:28

any of us, want all of our text messages

5:30

showing up on the front page of New York Times.

5:32

So what happens next? The

5:34

trial perhaps goes on, perhaps

5:37

there's a settlement? How long does it take

5:39

for this deal actually to close?

5:41

And then once it does close, what

5:43

do you think Elon does?

5:45

Folks are kind of associated with this belief that

5:47

assuming there is a settlement that it gets agreed upon and

5:49

that the court agrees upon, that the deal

5:51

should close sometime around year end.

5:53

What

5:54

is the best case scenario

5:56

in these next few months for Elon? And

5:58

what's the best case scenario for Twitter?

6:01

The

6:01

best case scenario for Elon is that

6:04

there's some sort of bombshell and he doesn't have

6:06

to buy Twitter anymore for forty four billion

6:08

dollars. I can't conceive of what that is, Oregon,

6:10

that this somehow does go to trial and his lawyers

6:12

are better than Twitter's lawyers and they persuade the

6:14

judge to to let him off the hook. That's the best case.

6:16

He just gets to walk away with this with some Ag

6:18

on his face and move on and keeps

6:20

his Twitter account. What most likely happens

6:22

though, either by court or by settlement, is that he

6:24

will acquire this company and

6:26

then he now needs to

6:28

figure out a way to make it worth

6:30

more than forty four billion dollars.

6:32

He's got a little bit of leeway that current.

6:34

Management doesn't because it won't be a publicly held

6:36

company. He doesn't have to worry about hitting quarterly

6:39

numbers. But in the end, he's got to introduce

6:41

new product He's got to expand

6:43

what Twitter does. He's got to expand his user

6:45

base. He's got to make it young. He's basically

6:47

got to make Twitter cool again.

6:50

We'll be right back.

6:57

We're back

6:59

with Dan Primack and Sarah Fisher.

7:01

So

7:02

Sarah, I've got some questions for you.

7:04

For starters, what is happening

7:07

inside of Twitter with the rank and file?

7:09

I

7:09

think the rank and file is nervous. Leading

7:11

up to this point, there's been a little bit of

7:13

senioritis within Twitter. They're

7:15

trying to act as though it's business as usual.

7:18

But at the same time, management

7:20

is preoccupied with getting a deal

7:23

done. they aren't reporting

7:25

earnings in the same way that they used to when

7:27

they were just fully publicly traded and

7:29

they weren't considered in a

7:31

takeover process. and they

7:33

have to face questions about this deal

7:36

every single day. I've talked to folks

7:38

who are across the company in different

7:40

departments, whether it's marketing or sales

7:42

or communications, they're definitely scared.

7:44

I mean, people don't want to lose their jobs. They

7:46

know layoffs are likely. They're

7:48

scared of the things that they've been building

7:50

for a long time, getting dismantled or

7:53

changing, but there's

7:55

also a sense of relief. This

7:57

entire saga has weighed on them, and

7:59

I think Just knowing

8:01

what the next path forward is for the company

8:03

allows them to decide what's the next path

8:05

forward for themselves at the outset

8:07

of Elon Musk expressing interest

8:09

in buying Twitter. Employees were

8:11

sort of excited some of them

8:13

because they thought, you know, we are a platform

8:15

that's been known to innovate slowly, that's

8:17

been slow to introduce new products. Like,

8:20

maybe Elon could help to

8:22

guide that process and maybe he could

8:24

bring a diversity of thought.

8:26

What might Musk's ownership of Twitter

8:28

mean to Twitter users?

8:30

Musk has been a little

8:32

bit scattered in terms of laying out

8:35

plan. For the past few years, all of

8:37

the conversation around Twitter has been around

8:39

content moderation and how did they adjust

8:41

their policies to make sure that they're

8:43

addressing hate speech and violence and Harish

8:45

content. Now at first, he

8:47

was very open about saying he thinks there should be

8:49

less content moderation

8:51

on the platform, meaning

8:53

less interference with accounts that

8:55

have paid speech and violence,

8:57

etcetera, less interference with

8:59

accounts that, you know, may

9:01

have been suspended or

9:04

disciplined under the old Twitter

9:06

regime, he has said that he would bring Donald

9:08

Trump back onto the platform. So

9:11

one Users can expect that Twitter is

9:13

going to be a more chaotic place, quite

9:15

frankly, with less rules, more free

9:17

speech, etcetera. On the flip

9:19

side though, Musk seems

9:21

much more excited about the product development

9:23

at the company than he does the policies.

9:25

He really wants to focus on product

9:27

development. He's a product guy. He's an engineer

9:29

at heart. And what he's sort of

9:31

hinted at is that he wants to make Twitter,

9:33

what we call a super app. A

9:35

super app is a mobile app that

9:37

has a lot of different functions inside

9:39

it, which means that you could do messaging, you

9:41

could buy tickets to your favorite

9:44

concert, you could hail a cab,

9:46

you could get your groceries delivered

9:48

all within one app. In China, there's a

9:50

bunch of apps like that. WeChat is probably

9:52

the best example. In the

9:54

US, because our Internet economy is a little bit

9:56

older, we had so many

9:58

different established companies that

9:59

started before the mobile era they all

10:02

develop their own individual apps. So you

10:04

don't

10:04

typically buy your groceries on the same

10:06

app that you would use to, let's say,

10:08

do social media or buy tickets to

10:10

a concert. Elan Musk is trying to bring

10:12

that mentality of a super app

10:14

here to the US with Twitter.

10:16

Do you

10:16

think this saga in Musk wanting

10:19

to buy it, then backing off, then coming

10:21

back? Has that hurt Twitter and

10:23

its value? Well, it's

10:24

made it complicated because on the

10:26

public markets, Twitter's shares

10:28

have risen and fallen for months

10:30

drastically in response to every

10:32

little twist and turn of this deal.

10:34

But overall, I think what Musk

10:36

has done is he's driven a

10:38

conversation around Twitter, the

10:40

future of the platform, its weaknesses,

10:43

and its opportunities not only

10:45

is it a business that grows a lot slower

10:47

than its competitors, but

10:50

its business is not as resilient

10:52

as some of its competitors to the current

10:55

market

10:55

right now. Twitter has been struggling

10:57

a lot as a business. I think if it

10:59

weren't for the Musk takeover

11:02

bid, Twitter's

11:02

stock would be in the toilet.

11:04

What would you identify as the single greatest

11:06

business challenge that Twitter has right

11:08

now? Right now,

11:08

Twitter is mostly an ad supported business,

11:11

but compared to its peers, its ad

11:13

business is growing much slower. Part of

11:15

that is because they don't have enough

11:17

ads that are being sold in a

11:19

direct response way, meaning they're helping

11:21

advertisers sell goods, not just say how

11:23

great their brands are. And then another part

11:25

of the problem for Twitter is that they

11:27

basically solely rely on ads. They have a

11:29

little part of their business on licensing,

11:31

but for the most part, it's not like they

11:33

have a massive subscription business at this

11:35

point, although they're trying to get into it. They don't

11:37

have an e commerce business, etcetera.

11:39

What Elon Musk, I think, is

11:41

gonna try to do is figure out not just how we

11:43

can build the products that better for

11:45

users, but how can he build it so that it

11:47

actually makes money and that the business

11:49

actually grows its revenue and

11:51

profits significantly and much more

11:53

quickly? If

11:54

you were making a to do list for Elon

11:56

the day after he acquires

11:59

Twitter, what would

11:59

be on it? The first

12:01

thing he needs to do is audit the

12:03

platform. Elon has talked about bots over and over

12:05

and over, but it's not exactly clear

12:07

what that means. when you talk about

12:09

bots, some people use that interchangeably with

12:11

spam. SPAM accounts are

12:13

typically used to get people to

12:15

do something they wouldn't wanna do.

12:17

Misleading content getting them to click something

12:19

that wouldn't have otherwise clicked. bots

12:21

can sometimes be spam, but sometimes

12:23

bots can be good. I mean, if there are a lot of

12:25

local municipalities, that use

12:27

automated accounts bots

12:29

to be able to send out weather alerts when

12:31

there are hurricane disasters or

12:34

natural disasters. And so Elon

12:36

Musk says he wants to get rid of all the bots.

12:38

Well, there are a lot of bots that are important to the

12:40

platform. And so he's gonna have to figure

12:42

out and define what is the type of

12:44

spam accounts that he doesn't like? How many of them

12:46

are actual bad bots versus good

12:48

bots? And what does he wanna do about

12:50

it? Once

12:50

he has that audit done,

12:53

can then start to figure out who are the

12:55

right people in

12:56

place or that I need to put in place

12:58

to take this company to the next

13:00

level it seems likely he's gonna bring in

13:02

his own top leaders. It seems likely

13:04

he'll bring in a lot of his own engineering

13:07

staff, the types of people that he thinks are gonna be

13:09

well suited to build

13:11

out the products that he's envisioning for the

13:13

company. And then the third thing he needs

13:15

to do is he needs to do some

13:17

serious research and development to figure

13:19

out What is this

13:21

platform capable of turning

13:23

into? And what

13:25

does he need to get it there? So Elon

13:27

Musk might go in and find things that Twitter that are

13:29

working and he wants to double down on. For

13:31

example, he might take a look at

13:33

Twitter's live audio feature called

13:35

Twitter spaces. a two way

13:37

conversation that can happen between many

13:39

parties on the Internet and say, that's working and

13:41

I wanna double down on it. Or he might look

13:43

at other features and say, this isn't doing

13:45

well enough. For example, Twitter does

13:47

have a subscriptions feature. They

13:49

allow users to follow accounts that

13:51

they really like and pay them to

13:53

get more of their content he might go in

13:55

there and say, this micro

13:57

payment strategy isn't really effective and not

13:59

enough people are paying. It's just all a

14:01

matter of him going in and doing the

14:03

research Typically, when a buyer comes into

14:05

a company, they do so much due

14:07

diligence on it, they do so much research on

14:09

it, that they have a good idea of

14:11

what needs to get done next. Elon

14:13

Musk waved his rights to due diligence

14:15

in April. Dan, you and I have been covering

14:17

this for months now. And

14:19

given what we've just discussed, It sounds like we've

14:21

got another long few months ahead

14:23

of us. Thanks

14:24

for talking to me. Thanks for doing

14:26

this.

14:30

I'm Erica Pandey. Amy Padula is

14:32

reporter producer.

14:33

Naomi Shabin is senior producer.

14:36

This series was reported by the

14:38

Axios News Room. including Dan

14:40

Primack, Miriam Kramer, Joanne

14:42

Mueller, Javier E. David,

14:44

Jonathan Swan, Sarah

14:47

Fisher, Dina Freed, King

14:50

and Me. Fact checking by

14:52

Jacob Knudson. Scott Rosenberg

14:54

and Alison Snyder are series

14:56

editors. Sarah Keelani Ghoo is the

14:58

editor in chief executive producer.

15:01

Mixing and

15:01

sound design by Ben O'Brien and

15:03

Alex

15:03

Aguirre. The music and

15:05

original score by Michael Ham.

15:07

special thanks to Akceo's co founders,

15:09

Mike Allen, Jim Bandehi, and

15:11

Roy

15:11

Schwartz. And thanks to

15:14

Lucia Odaher Dana, Priyanka

15:16

Vora, and Brian Wes If you're

15:18

enjoying the season so far,

15:20

please take a moment to

15:21

rate and review the show. Thanks

15:23

for listening, and we'll be

15:25

back.