AYESHA RASCOE, HOST:
The battle between Elon Musk and Twitter isn't going anywhere anytime soon. In April, the billionaire businessman persuaded Twitter's reluctant board members to sell the social media company for $44 billion. But just this week, Musk reversed course, complaining that Twitter had failed to provide information he'd asked for. Felix Salmon is chief financial correspondent for Axios. He joins us now from New York City. Welcome.
FELIX SALMON: Thank you very much. Great to be here.
RASCOE: Elon Musk's attorney said Twitter wasn't giving out accurate information about the number of fake accounts on Twitter. Why would bots matter to whether Twitter is profitable or not?
SALMON: So if a bot views ads that advertisers have paid for, then that page view is basically defrauding the advertiser. So that is the argument that Elon is kind of trying to make 'cause he's saying that if a lot of bots are seeing ads that Twitter is saying are being seen by humans, then they are making a bunch of money under false pretenses from the people who advertise on Twitter.
RASCOE: Can he have looked into this before he agreed to buy Twitter? Like, why put an offer up?
SALMON: Not only could he have looked into it, he did look into it. And that was the stated reason why he said he wanted to buy Twitter. He said, I think I can improve Twitter by getting rid of those bots and spam accounts. It was only after there was this big stock market crash in tech stocks that he realized that the amount he was paying for Twitter was actually more than he could really afford and was also more than it was really worth. And so he started looking for ways to back out of the deal.
RASCOE: Elon Musk is one of the richest guy in the world, right? Why couldn't he just come up with the money? Why couldn't he toss over some pillow cushions or something and just put the money up, right? He doesn't have it?
SALMON: It's a really - it's a - yeah. Basically, yes. It's a really good question, right? So when it comes to him being the richest man in the world, that's not money that he has sitting in a bank account at Wells Fargo, right? Most of it is in the form of Tesla stock. He owns a lot of Tesla shares, but a lot of those have been pledged to other banks because he's borrowed against them. He also owns a bunch of shares in SpaceX, his space company. And those are even less liquid because they're not traded on the stock exchange. He would need to sell a huge amount of his stock in either Tesla or SpaceX or both, and he really doesn't want to do that to buy Twitter.
RASCOE: Is that kind of like, in a real person's way - it's like, I could probably get the money, but I don't want - it's going to be too hard.
SALMON: Imagine you go into a store and you see an amazing sofa, and you're like, I want this sofa. And they sign the thing and they're like, OK, we'll custom make it for you. We'll deliver it in six months. And you're like, perfect. I'll pay you in six months. But then you realize, as that six-month date is coming due, that the banks don't actually want to lend you money against that equity. So you would actually kind of need to sell the house in order to buy the sofa, and that would defeat the purpose. And so you then phone up the store, and you say, actually, never mind. I don't want this sofa after all. And then the store says, well, actually, you have a binding contract under Delaware law which says that you have to buy the sofa. And if you need to sell your house to buy the sofa, then you need to sell your house.
This is what's happening. Everyone is moving to Delaware, basically - a bunch of lawyers are going to wind up in Delaware fighting this out in front of a judge.
RASCOE: Yes, because Twitter has said they are going to fight this. And, you know, from the lawyers that you have talked to, do they have the upper hand, or is this really kind of unprecedented territory?
SALMON: Most of the independent lawyers that are looking at this say that, yes, Twitter does have the upper hand. The merger agreement was written in such a way as to specifically not allow Elon Musk to pull this kind of a stunt.
RASCOE: Do we know what is going to happen next?
SALMON: When you have this many lawyers making this many dollars, Ayesha, the one thing I can tell you for sure is that, no, we don't know what's going to happen next. We know that there's going to be a court fight. And if that court case makes it all the way through to the end, then at some point, a judge will side with one side or the other and will say, you know, Elon needs to pay Twitter a billion dollars or Elon needs to buy Twitter anyway or Elon doesn't owe anyone - anything to anyone. There's a lot of different possible outcomes, for sure.
RASCOE: Felix Salmon is the chief financial correspondent for Axios. Thanks for joining us.
SALMON: Thank you.
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