by Timothy Kunken
How did the deal take place? Did Elon Musk just waltz into Twitter headquarters, offer to buy the company, and get told by Jack Dorsey, “that’ll be $44 billion. Debit or credit?” In short: no. If only it were that easy.
In reality, Elon Musk’s purchase and taking the reins was a months-long winding path filled with legal shenanigans, bickering, confusion, and indecisiveness. Here’s how it all went down:
Window Shopping
Musk begins buying Twitter stock on January 28, 2022, according to a filing from the Securities and Exchange Commission (SEC). (This is the American government agency responsible for monitoring and regulating the stock market to prevent market manipulation.)
Later, Musk first contacted Jack Dorsey on March 26 to discuss “the future of social media” according to another SEC filing. He also talks with the rest of the Twitter board about potentially joining the board of directors or starting a competitor to the platform the following day.
On April 9, Elon revealed that he was the largest shareholder in Twitter with him owning 9% of the company, according to yet another SEC filing. Immediately after the announcement, Twitter’s stock price surged 27%. But, wait! By March 14, he had already amassed a 5% share of the company. According to SEC regulations, he was legally required to disclose that earlier with a filing to the agency and a public statement to the shareholders by the latest date of March 24. Instead, he had disclosed that information a week and a half after. He may have done this in order to take advantage of the jump in stock prices after his potential announcement, but in doing so he violated a federal securities law.
“No fair!” cried investors as they took Musk to the New York federal court in a lawsuit. Claiming that Musks’ flouting of securities law wrongfully deprived them of potential financial gains, the investors sought compensation. As of today, the case of Rasella v. Musk has had no official verdict.
Moving on, on April 5 Twitter announced that Elon will join the board of directors. Five days later on the 10th, Elon said he didn’t want to join anymore. Three days later on the 13th, he then placed a bid to buy the company at $54.20 per share, or $43 billion in total. Not liking this offer, Twitter puts in place a “poison pill” provision. In Wall Street terms, that means that shareholders are allowed to buy additional shares at a discount price, hurting Musk’s offer by making it more pricier on his end of the bargain.
In the end, it was no use. On April 26th, Twitter officially announced that they accepted Elon Musk’s offer to buy the company at $44 billion. Fantastic! Now we can wrap this up in a neat little bow and continue onto this series, right? Actually, why did it take months from April to September before the deal actually went into effect?
Buyer’s Remorse
It turns out that Elon Musk started having second thoughts about buying the platform. After amassing some funding from investors and from selling his Tesla stocks, Musk announced that the deal was “temporarily on hold” in a tweet on May 13. His reasoning was that he needed to be sure about the amount of spam and bot accounts operating on the platform. Along with the tweet, he shared a Reuters report stating that Twitter claimed to have less than 5% of activity comprising spam and bot activity. Skeptical, Musk began drilling Twitter staff for “details supporting [the] calculation” before he would consider moving forward with the purchase, but still stated that he’s “still committed”. Why Musk would start examining the nutritional content of his groceries only after reaching the cash register is beyond me.
Elon and Twitter spend the next month and a half sitting on their hands, each bickering over bots. By July 8, Musk finally has enough and threatens to pull out of the deal, according to an SEC filing. Twitter — fed up with Musk’s antics — sues him, alleging that he “refuses to honor his obligations” and that he has acted in bad faith. At this point, their breakup is beginning to morph into a brawl, and October is scheduled for fight-night. In the meantime however, something else is brewing inside Twitter headquarters that will add fuel to the fire…
Public Square, Private Hands: How Elon Musk Bought Twitter
The Mudge Affair
Peiter Zatko, better known as “Mudge”, is a fascinating person. A hacker by trade since the 1990s, he pioneered research into cybersecurity. One of the members of L0pht Heavy Industries, a hacker think tank, he created various security programs such as L0phtCrack and AntiSniff. Zatko, along with L0pht, testified in front of Congress in 1998 about cybersecurity vulnerabilities, and he later went on to personally brief Bill Clinton in 2000 after recent cybersecurity attacks.
Mudge is what you would call a “white hat hacker.” This is essentially a hacker that uses their experience and know-how for good, informing businesses and institutions about potential cyber threats and vulnerabilities. Think of it like hiring a former burglar to survey your house so they can tell you how to better protect it. In the digital age, this practice has become essential for companies and governments in ensuring secure networks and better protected websites.
Peiter Zatko quickly soared to become the face of white hat hackers, and that scored him many top positions. In 2010, he became a program manager at DARPA, (a research agency under the Department of Defence), where he oversaw cybersecurity research. By 2013, he left DARPA in favor of working under the Advanced Technology & Projects (ATAP) division of Google. Zatko left Google in 2015 to return to the government sector when he became the head of CyberUL, a project by the White House similar in spirit to Underwriters Laboratories (a 111 year old company specializing in testing the safety of various products), albeit dedicated to cybersecurity. At this point, Mudge was swimming in clout. This led him to catch the eye of Twitter’s leadership. In 2020, he was officially brought in as the leader of Twitter’s cybersecurity division, which is where his story brushes paths with Elon Musk’s.
Fast forward to January of 2022. Right as when Musk’s story with Twitter begins, Mudge’s ends. He gets fired. Twitter’s reasoning is that it was due to “ineffective leadership and poor performance,” which his attorneys claim as false. Later in June, Zatko strikes a confidential deal with Twitter for him to receive a $7 million settlement in exchange for him not being allowed to speak publicly about his tenure at Twitter, according to the Wall Street Journal. This however wouldn’t stop him from breaking headlines as the year’s biggest whistleblower.
In August, Peiter Zatko publicized a whistleblower complaint to Congress. He states that, over the course of his year at Twitter, he observed the platform engaging in gross negligence when handling user data, security, privacy, and even violated several securities laws. For example, Twitter employees had near total access to users’ sensitive information — a huge breach of privacy that isn’t even necessary for the job. Additionally, Twitter’s digital infrastructure was incredibly fragile; one single crash or data failure could tank the entire platform. On top of that, Twitter’s platform increasingly became the playground of spies and foreign governments who demanded user data so they can prosecute their own citizens for activity on the site. Lastly, Twitter really did mislead investors and Elon Musk about the proliferation of spam bots on the platform, (go figure). All of these revelations were happening at the same time as Musk and Twitter’s courtroom sparring, and Elon Musk employed Zatko’s testimony as another piece of evidence building up his case.
Mudge went on to testify in front of Congress on September 13. Among the details shared and expanded upon were: the fact that the FBI warned Twitter that a Chinese spy was on their payroll and had access to company-wide data; the fact that there were consistently thousands of attempts to hack the platform happening every week; the fact that the data Twitter has on hand makes it attractive to foreign intelligence agencies; and that FTC regulations had lax enforcement against the platform because the government let Twitter and other companies “grade their own homework” with regards to the law. Yikes!
Almost a year after losing his job at Twitter, Peiter Zatko currently works at the cybersecurity firm Rapid7 as of early January 2023.