lawsuit seeking to force him to go through with his $44 billion takeover of the social-media platform and included counterclaims against the company. The filing Friday was made confidentially and isn’t viewable by the public.
It isn’t unusual for counterclaims against a public company to be filed confidentially, pending review for possible redactions of sensitive information. The response and claims may be available as soon as next week.
One of the counterclaims by Mr. Musk is expected to center on the allegation that Twitter changed its number of monetizable daily active users shortly after agreeing to the deal, and then didn’t provide thorough responses to requests by Mr. Musk’s team for data on the spam number, according to people familiar with the matter.
Mr. Musk’s response Friday includes a reference to the
Warren Buffett
quote: “Only when the tide goes out do you discover who’s been swimming naked,” the people said, a suggestion by Mr. Musk that Twitter has been obfuscating about spam and fake accounts because it knew the market downturn could reveal its weaknesses.
Mr. Musk’s response Friday was filed hours after the judge overseeing the lawsuit against Mr. Musk set the week of Oct. 17 for a 5-day trial.
While Mr. Musk’s answer and counterclaims to Twitter’s lawsuit aren’t immediately accessible, the billionaire chief executive officer of
Tesla Inc.
has been vocal about his reasons for wanting to walk away from the deal and indicated in previous regulatory and court filings how he may try to make his case for terminating the merger agreement.
Mr. Musk said in a regulatory filing earlier this month that he wanted out of the deal primarily because Twitter hadn’t provided the necessary data and information he needs to assess the prevalence of fake or spam accounts.
Twitter rejected that assertion and argued that Mr. Musk hasn’t adhered to the deal terms, including violating a nondisclosure agreement and then bragging about it on Twitter. The social-media company sued Mr. Musk on July 12 in Delaware Chancery Court, seeking to enforce the terms of the transaction.
In the regulatory filing to end the deal, Mr. Musk’s lawyer cited concerns over Twitter’s estimates about how many of its daily users are fake or spam accounts, an issue the billionaire had raised as a concern about the deal almost three weeks after he signed it. The company has said for years that it estimates fewer than 5% of its monetizable daily active users are spam and fake accounts, a figure Mr. Musk has disputed.
In a July 18 court filing opposing a request by Twitter for an expedited trial, the billionaire for the first time laid out publicly a clear timeline around his concerns over data about fake and spam accounts, and included new claims about Twitter’s level of cooperation on the issue.
He said his team first became concerned about the company’s user numbers after it disclosed in its April earnings report that it had overstated its user base for nearly three years through the end of 2021 because of an error in how it accounted for people linked to multiple accounts. The revision reduced the number of its monetizable daily active users by 0.9% for the fourth quarter of last year. The company last week said it averaged 237.8 million of such users in the most recent quarter.
According to that filing, Mr. Musk met with Twitter executives in May to discuss how the company measures spam and fake accounts and expressed dismay at the company’s process and pointed to the absence of automated tools to help with the calculation.
Twitter said in its suit against Mr. Musk that his attempt to abandon the transaction reflects souring market conditions that resulted in his personal wealth declining by more than $100 billion from its November 2021 peak. “Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter’s stockholders,” the company said.
Elon Musk has cultivated close ties with Beijing to build Tesla’s business in China. Now that he is buying Twitter and focusing on free speech, WSJ looks at how China has used the social-media platform to promote its views, and why that’s raising concerns. Photo Illustration: Sharon Shi
On July 19, Chancellor Kathaleen St. Jude McCormick, the chief judge of the Delaware Chancery Court, granted Twitter’s request to fast-track its lawsuit over Mr. Musk’s objections.
In a regulatory filing this week, Twitter said it would ask shareholders to vote on the merger at a meeting on Sept. 13. The company reiterated its commitment to completing the takeover at the agreed-upon price and said its board of directors has unanimously recommended that shareholders vote in favor of it. That process is running parallel to the legal case in Delaware that will determine whether the merger agreement can be enforced.
Write to Sarah E. Needleman at sarah.needleman@wsj.com and Cara Lombardo at cara.lombardo@wsj.com
is cutting roughly 1,000 workers, or 10% of its global workforce, rolling back a bet on e-commerce growth the technology company made during the pandemic, according to an internal memo.
Tobi Lütke,
the company’s founder and chief executive, told staff in a memo sent Tuesday that the layoffs are necessary as consumers resume old shopping habits and pull back on the online orders that fueled the company’s recent growth. Shopify, which helps businesses set up e-commerce websites, has warned that it expects revenue growth to slow this year.
Shopify’s shares fell 14% to $31.55 on Tuesday after The Wall Street Journal first reported on the layoffs. The shares have fallen more than 80% since they peaked in November near $175 adjusting for a recent stock split. The company reports quarterly results on Wednesday.
Mr. Lütke said he had expected that surging e-commerce sales growth would last past the Covid-19 pandemic’s ebb. “It’s now clear that bet didn’t pay off,” said Mr. Lütke in the letter, which was reviewed by the Journal. “Ultimately, placing this bet was my call to make and I got this wrong.”
The Ottawa-based company will cut jobs in all its divisions, though most of the layoffs will occur in recruiting, support and sales units, said Mr. Lütke. “We’re also eliminating overspecialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products,” he wrote. Staff who are being let go will be notified on Tuesday.
Shopify’s job cuts are among the largest so far in a wave of layoffs and hiring freezes that is washing over technology companies. Rising interest rates, supply-chain shortages and the reversal of pandemic trends, including remote work and e-commerce shopping, have cooled what was once a red-hot tech sector.
Shopify’s job cuts are the first big layoffs the company has announced since Tobi Lütke founded it in 2006.
Photo:
Cate Dingley/Bloomberg News
Netflix Inc.
cut about 300 workers in June as it deals with a loss in subscribers.
Twitter Inc.,
now mired in a legal standoff with
Elon Musk,
laid off fewer than 100 members of its talent acquisition team. Mr. Musk’s own company, electric-vehicle maker
Tesla Inc.,
late in June laid off roughly 200 people, after announcing it would cut 10% of salaried staff.
Other firms, including
Microsoft Corp.
and
Alphabet Inc.’s
Google, said they would slow hiring the rest of the year.
Tuesday’s announcement is Mr. Lütke’s first big move after Shopify’s shareholders approved a board plan to protect his voting power. The job cuts are the first big layoffs the company has announced since Mr. Lütke started the company in 2006.
Shopify’s workforce has increased from 1,900 in 2016 to roughly 10,000 in 2021, according to the company’s filings. The hiring spree was made to help keep up with booming business. E-commerce shopping surged during the pandemic, and many small-business owners created online stores to sell goods and services.
Shopify reported annual revenue growth of 86% in 2020 and 57% in 2021 to about $4.6 billion. However, the company reported a softening this year, and warned that 2022’s numbers wouldn’t benefit from the pandemic trends.
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In his memo on Tuesday, Mr. Lütke said, “What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point. Still growing steadily, but it wasn’t a meaningful 5-year leap ahead.”
Shopify has been expanding its business in recent years to provide more services for merchants. It has developed point-of-sale hardware for retailers, launched a shopping app for its merchants to list products and created a network of fulfillment centers to ship orders for its business partners.
In May, Shopify agreed to buy U.S. fulfillment specialist Deliverr Inc. for $2.1 billion in cash and stock. It announced partnerships with Twitter in June and with YouTube earlier this month, allowing users to buy items that Shopify merchants post on those platforms.
Shopify is offering 16 weeks of severance to the laid-off workers, plus one week for every year of service.
Shares of Twitter fell 2% to $38.72 in premarket trading. Twitter’s results Friday follow rival social-media company
Snap Inc.
SNAP 5.42%
posting its weakest-ever quarterly sales growth because of “increasing competition for advertising dollars that are now growing more slowly.”
Twitter, in its news release, cited “advertising industry headwinds associated with the macroenvironment as well as uncertainty related to the pending acquisition of Twitter.” The company won’t host an earnings conference call because of the pending transaction, which it is suing Mr. Musk to complete.
Twitter’s revenue dipped to $1.18 billion from $1.19 billion a year ago, and was below the average analyst estimate of $1.32 billion on
FactSet.
Advertising revenue rose 2% from a year earlier to $1.08 billion. In the first quarter, advertising revenue grew 23%.
“The digital ad metrics they’re holding are relatively firm despite a dark macro environment,” Wedbush Securities analyst
Dan Ives
said. “They’re not falling off a cliff like we saw with Snap.” Shares of Snap were down more than 30% in premarket trading Friday.
Twitter reported a loss of $270 million, or 35 cents a share, compared with year-ago earnings of $65.6 million, or 8 cents a share. Excluding items like stock-based compensation, the company reported an adjusted loss of 8 cents a share. Analysts, on average, were expecting an adjusted profit of 14 cents a share, FactSet shows.
The number of Twitter’s monetizable average daily active users increased to 237.8 million from 229 million in the first quarter and 206 million a year ago. U.S. users–who make up the company’s biggest market–grew to 41.5 million from 39.6 million in the first quarter and 37 million a year ago. The company said the increase was driven by product improvements and global conversation around current events.
At the release of its results in April, Twitter said it was withdrawing earlier goals and outlooks, and it wouldn’t provide forward-looking guidance. Before Mr. Musk’s courtship, Twitter had been working to achieve three main goals by the end of 2023: to surpass $7.5 billion in annual revenue, reach 315 million daily users and double the pace at which it produces new technology.
Earlier this week, Delaware Chancery Court’s chief judge granted Twitter’s request to fast-track its lawsuit against Mr. Musk. A five-day trial is scheduled for October despite opposition from the billionaire’s lawyers, who argued that a trial should take place on or after Feb. 13 of next year.
Mr. Musk has said his primary reason for backing out of the deal is a lack of faith in Twitter’s estimate that less than 5% of its monetizable daily active users are spam or fake accounts. He has said that estimate is probably too low.
Twitter has said for years in its securities filings that the number of fake and spam accounts on its platform could be higher than its estimates. The company said in its lawsuit against Mr. Musk that he has buyer’s remorse over the fall in share prices since he agreed to the deal in April.
In a recent court filing, Mr. Musk’s team said they became concerned about Twitter’s user numbers after the company disclosed in its April earnings report that it had overstated its user base for nearly three years through the end of 2021 because of an error in how it accounted for people linked to multiple accounts. The revision reduced the number of monetizable daily active users by 0.9% for the fourth quarter of last year.
The court filing also said Mr. Musk met with Twitter executives in May to discuss how the company measures spam and that he was “flabbergasted to learn just how meager” its process was and pointed to the absence of automated tools to help with the calculation.
Mr. Musk’s bid for Twitter has helped hold up the company’s stock price amid a sharp selloff in tech company stocks. Before Friday, Twitter’s stock price was down less than 10% so far this year, while the tech-heavy Nasdaq Composite Index has lost more than 20%.
The deal for Twitter values the company at $54.20 a share. Twitter shares closed at $39.52 on Thursday.
Elon Musk has cultivated close ties with Beijing to build Tesla’s business in China. Now that he is buying Twitter and focusing on free speech, WSJ looks at how China has used the social-media platform to promote its views, and why that’s raising concerns. Photo Illustration: Sharon Shi
Write to Sarah E. Needleman at sarah.needleman@wsj.com
request to fast-track its lawsuit seeking to compel
Elon Musk
to go through with his $44 billion purchase of the company.
Chancellor Kathaleen St. Jude McCormick, the chief judge of the Delaware Chancery Court, ordered a five-day trial in October, over Mr. Musk’s objections. Chancellor McCormick said the case should be resolved quickly, agreeing with Twitter’s claim that it could be harmed by uncertainty about its future as a public company.
“Those concerns are on full display in the present case,” Chancellor McCormick said. “Typically, the longer the merger transaction remains in limbo, the larger the cloud of uncertainty cast over the company and the greater the risk of irreparable harm to the sellers.”
Twitter argued the case should be accelerated because shareholders and its business have been left in limbo by Mr. Musk’s move this month to flee the deal, citing the prevalence of spam or fake accounts on the platform. In the hearing, Twitter’s lawyers said the lawsuit doesn’t turn on the amount of spam and fake accounts because the merger agreement didn’t make any promises about that metric. Twitter’s securities filings say the number of fake and spam accounts could be higher than the company’s estimates, he noted.
“That’s not what this case is about,” attorney
William Savitt
said Tuesday. It’s a “manufactured issue,” he said.
Mr. Musk says he needs more time to investigate the spam and fake accounts issue, which he says is fundamental to Twitter’s value and preparing for the trial will be “extremely fact and expert intensive, requiring substantial time for discovery.” In the hearing Tuesday, Mr. Musk’s lawyer said Twitter is trying to railroad him to complete the deal while burying the truth over the number of fake and spam accounts. He said Mr. Musk has a bigger economic interest in the company, as the second-largest shareholder, than the company’s entire board, and therefore has no interest in stalling to harm the company.
Mr. Musk says Twitter’s estimate that fewer than 5% of its monetizable daily active users are spam or fake is questionable, and probably too low.
Twitter, which filed its lawsuit last week, says its process for estimating fake accounts and malicious bots is rigorous.
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“There is no reason to go into how many bots there are if a fair reading of the contract said Musk essentially waived that right,” said James Cox, a professor of corporate and securities law at Duke University.
Mr. Musk has cited at least two different reasons tied to spam and fake accounts to leave the deal. One is that Twitter allegedly misstated facts about that data in a way that could have a material adverse effect on its business. Delaware law allows companies to nullify mergers if a material adverse effect has occurred, but its courts have also tightly circumscribed the conditions for such an outcome.
Mr. Musk says his other basis to exit is that Twitter has allegedly withheld information about fake accounts, behavior that would violate its commitments to the merger agreement. “The limited information Twitter has provided calls its representations into serious doubt,” Mr. Musk’s lawyers wrote last week in a court filing.
Elon Musk has cultivated close ties with Beijing to build Tesla’s business in China. WSJ looks at how China has used Twitter to promote its views, and why that’s raising concerns. Photo Illustration: Sharon Shi
Mr. Musk may have sought more time for the lawsuit because financial settlements are more likely to occur in drawn-out legal cases, Mr. Cox said. Twitter is seeking a remedy known as “specific performance,” meaning Mr. Musk would have to go through with the $44 billion acquisition.
Twitter has also said Mr. Musk has buyer’s remorse over the decline in share prices since he struck the deal in April. Mr. Musk’s personal wealth has declined by more than $100 billion from its November 2021 peak.
Mr. Birchall, a straight-laced, 48-year-old wealth manager who rose to become Mr. Musk’s top deputy and the head of his family office, had growing concerns about a new power player in the
Tesla Inc.
TSLA 0.74%
CEO’s orbit.
Mr. Musk was increasingly relying on a new adviser, a 34-year-old, Russian-born ex-professional gambler named
Igor Kurganov.
Mr. Kurganov spent some of the pandemic sleeping in Mr. Musk’s home, where they chatted late into the night about how the world’s richest person might use his fortune to help shape the planet through a giving strategy known as “effective altruism.”
Mr. Kurganov had no experience in finance or security but was suddenly a central figure in both areas for Mr. Musk. He had moved from London to Texas and replaced some of Mr. Musk’s protection detail with new hires of his own. Not long after, the Tesla CEO told Mr. Birchall that he was so taken by the younger man’s ideas that he wanted to leave him in charge of his charitable giving, dispersing funds from Mr. Musk’s vast private fortune, currently around $230 billion, as he saw fit.
“Elon,” Mr. Birchall told his boss, according to three people briefed afterward. “You can’t.”
The clash between the two men, and their dueling efforts to gain the upper hand with Mr. Musk, provides a peek into the often tumultuous private workings of Mr. Musk’s inner circle. As Mr. Musk’s breakneck, $44 billion bid for Twitter shows, the entrepreneur can be prone to quick decisions, ones that he can reverse just as quickly as he makes them. That deal is now in peril, with Mr. Musk trying to walk away and
Twitter
TWTR 4.00%
suing him to complete it.
All the while he is egged on by a rotating crew of investors, underlings and ever-changing friends whose power and personal wealth is closely tied to their proximity to Mr. Musk, according to people who do business with him.
Two men in particular have pulled the Tesla CEO in opposing directions.
Mr. Birchall is an Eagle Scout and practicing Mormon who doesn’t smoke or drink and grew up traveling California as part of a song-and-dance troupe called “The Birchall Family Singers.” He declined to be interviewed through a representative of Mr. Musk’s foundation.
Mr. Kurganov is a high-roller with a reported more than $18 million in poker winnings, with long hair and beard and a peaceful demeanor. He has said in a podcast interview that he dropped out of college because he was smoking too much marijuana. He didn’t respond to requests for comment.
Igor Kurganov, shown playing poker in a tournament in 2016, became a top adviser to Mr. Musk on charitable giving.
Photo:
Joe Giron/World Poker Tour
Last winter, Mr. Musk came to a compromise between the two. He allowed Mr. Kurganov to oversee $5.7 billion in Tesla shares that the CEO pledged late last year to eventually donate to charity. The rest of Mr. Musk’s overall fortune remained under Mr. Birchall’s purview.
That decision wasn’t, however, the end of the fracas.
This account is based on interviews with more than a dozen people close to Messrs. Musk, Birchall and Kurganov, including associates of the Musk Foundation and investors.
Ultimate fixer
For a man of immense resources, Mr. Musk is a minnow in the world of big-dollar philanthropy. Compared with other magnates such as
Microsoft Corp.
co-founder
Bill Gates
and
Amazon.com Inc.
founder
Jeff Bezos,
whose wealth, like Mr. Musk’s, is tied up in shares of their companies, Mr. Musk has said little concrete about his approach to giving. He didn’t respond to requests for comment.
Mr. Musk’s personal foundation gave away $23.6 million in fiscal 2020, the most recent year for which data is available, filings show. That represented roughly 0.02% of his net worth as of the end of that year, according to Forbes rankings.
Though Mr. Musk is known to favor his own counsel most of all, the man in charge of his foundation since 2016 has been Mr. Birchall, one of the longest standing in his inner circle.
Jared Birchall is a top deputy to Mr. Musk and head of the firm managing his fortune.
Photo:
Patrick T. Fallon/Bloomberg News
The alliance reflects Mr. Birchall’s role as the ultimate fixer for Mr. Musk, taking care of matters large and small. In addition to handling billions in assets, Mr. Birchall in 2018 under a pseudonym registered the website www.justballs.com, for example, after Mr. Musk mused online that he might want to own the domain name someday, legal documents show.
Mr. Birchall entered the technology world through finance. After his brief singing stint with his siblings—he is one of 11 children—he attended Brigham Young University.
He then spent a year at Merrill Lynch, where he was discharged for what the firm described in a filing as “sending correspondence to a client without management approval.”
Mr. Birchall eventually moved into private wealth and crossed paths with Mr. Musk about a decade ago while working as a client adviser in
Morgan Stanley’s
southern California offices. There, he impressed Mr. Musk by helping arrange hundreds of millions of dollars of loans from the investment bank at a time when the Tesla co-founder was strapped for cash, a person close to Mr. Musk says. When Mr. Musk started a private firm to manage his own money roughly six years ago, he tapped Mr. Birchall to run it.
Mr. Birchall’s work for Mr. Musk has at times led him into strange public controversies and lawsuits. After a British spelunker criticized Mr. Musk’s offer to help rescue a youth soccer team trapped in a flooded Thailand cave in 2018, Mr. Birchall created a fake email address under the name “James Brickhouse” to hire a private investigator to investigate the man, according to court documents.
Mr. Musk during a Tesla event in Shanghai in January 2020.
Photo:
Aly Song/REUTERS
Mr. Musk subsequently called the man “pedo guy” in a tweet, though he later apologized and said it was a joking taunt. The spelunker unsuccessfully sued Mr. Musk for defamation in a Los Angeles federal court.
In addition to his role helping manage Mr. Musk’s fortune, Mr. Birchall is also a director of his tunneling startup, Boring Co., and chief executive officer of Mr. Musk’s Neuralink, which aims to make a brain implant that could be used by quadriplegic patients to control a computer or other devices.
When Mr. Musk announced in 2020 he would move from California to Texas, Mr. Birchall moved his family there, too. He has since become the closest thing Mr. Musk has to a public face in the Texas capital, handling business and attending events on Mr. Musk’s behalf.
“No one else you reach out to who is close to Elon is going to return your calls,” says Tyson Tuttle, former chief executive of Austin semiconductor manufacturer Silicon Valley Labs.
‘Make big moves’
Mr. Kurganov first became friendly with Mr. Musk socially.
Born in Russia but raised in Germany from age 4 by parents who were engineers by trade, Mr. Kurganov grew up in a working class, immigrant household, according to an interview he gave to the Paul Phua Poker podcast.
In his 20s, he gained a level of fame as a professional poker player. Beginning around a decade ago, he began playing high-stakes tournaments in Las Vegas and racking up wins, fellow poker players say. He earned particular renown in 2012 when he won a €1,080,000 purse in Monte Carlo.
He was known as an aggressive player, and had the respect of his fellow pros, the players say. “Igor had a willingness to play a lot of hands and make big moves,” says one of them, Dan Smith.
Though he was spending much of his time in Las Vegas, his personality didn’t match the city’s loud stereotypes. One person who knows him says he was often drawn into long, philosophical conversations on topics such as the rise of artificial intelligence in poker. Mr. Kurganov was concerned that a computer program could be built that could beat even the most talented human player.
Ging Masinda, a Las Vegas marketer and acquaintance of Mr. Kurganov, says the flashiest thing about him is that he sometimes wears eyeliner. “There’s a kid in him,” she says.
In a 2015 interview on the Poker Life Podcast, he said he was developing an accounting app for poker players. He also co-founded the organization Raising for Effective Giving, designed to help poker players, as well as fantasy-sports players and finance professionals, find the right charities to which to donate their winnings, according to archived webpages.
REG was focused on effective altruism, an approach to giving that suggests that inherently subjective qualities such as relative charitable need can be quantified. It’s still a niche approach, because many charitable experts say it can encourage an impersonal, utilitarian approach to complicated moral issues.
Mr. Kurganov and Liv Boeree at an event in San Francisco in 2016.
Photo:
Kelly Sullivan/Getty Images for The Ocean Gala
Mr. Kurganov’s social life, the fellow poker players say, revolved around his longtime partner, fellow professional poker player Liv Boeree. Ms. Boeree has long been friends with the recording artist Grimes, who was first romantically linked to Mr. Musk in 2018. Around the same time, Mr. Musk made Ms. Boeree one of the handful of people he follows on Twitter.
“She was elated” about the follow, according to Joe Stapleton, a poker commentator who spoke to her about it.
The two couples began spending time together. Messrs. Musk and Kurganov bonded over a shared love of Burning Man, the free-spirited desert festival that both regularly attend. Ms. Boeree, meanwhile, stayed close with Grimes; the two women posted photos together on social media. Ms. Boeree didn’t respond to requests for comment, and Grimes, whose legal name is Claire Boucher, couldn’t be reached.
The introduction to Mr. Musk came as Mr. Kurganov was soon to retire from professional poker with millions in personal winnings. Yet his poker accounting app had never gotten off the ground, and REG remained small-fry in terms of the amount of money it directed.
REG said on its website that it directed $3.1 million in charitable giving in 2019, the most recent year mentioned, which the organization said “reflects all donations that have been significantly influenced by us.” The amount couldn’t be independently verified. REG didn’t respond to requests for comment.
When the pandemic hit, Messrs. Kurganov and Musk became closer. Mr. Kurganov laid out a vision in which he might be able to help Mr. Musk combine his interest in science and his vast fortune, for the greater good.
Mr. Musk, known to be open to new ideas, was intrigued by the prospect of an approach to giving that no other major donor had yet tried, according to people familiar with the matter. He gave Mr. Kurganov a job vetting grant requests from his foundation.
When Mr. Musk moved to Texas, Mr. Kurganov and Ms. Boeree soon followed.
A launch facility under construction in Brownsville, Texas, in February for SpaceX, one of Mr. Musk’s companies.
Photo:
Mark Felix/Bloomberg News
‘Donation decisions’
By last August, two years after retiring from poker, Mr. Kurganov had an official email address at the Musk Foundation and was heavily involved in the charity. That month, he corresponded with Chris Carberry, CEO of the nonprofit Explore Mars Inc. The group was looking to raise $600,000 to spirit an Afghan girls robotics team out of the war-torn country.
Mr. Kurganov was skeptical about the cost. “Regarding the price breakdown, what I’m trying to find out is what the expenses will be specifically—I imagine there are additional costs to simply the flight costs, but am still surprised that the total cost scales linearly with the number of people,” he wrote in an email reviewed by The Wall Street Journal.
Mr. Carberry, who didn’t respond to requests for comment, was disappointed but not dissuaded. In another email, also reviewed by the Journal, he wrote to an associate “We have worked effectively with Igor in the recent past. Igor makes the day-to-day donation decisions.”
To Mr. Birchall, that was an untenable situation. He was legally head of the foundation, and as he saw it, Mr. Kurganov was a newcomer who suddenly had immense influence on what to do with Mr. Musk’s money, he told people.
Mr. Birchall also learned that a Federal Bureau of Investigation agent had begun making preliminary inquiries into Mr. Kurganov as part of his job to watch for foreign interference in U.S. companies, people familiar with the matter say. The FBI agent was concerned that a newcomer had so quickly been welcomed into Mr. Musk’s inner circle, the people say.
Mr. Kurganov hasn’t been accused of wrongdoing. An FBI spokesperson didn’t respond to a request for comment.
Mr. Birchall, alarmed that Mr. Musk could be drawn into a federal investigation, this spring again pressed his internal case against Mr. Kurganov, people familiar with the matter say. It was inappropriate, in Mr. Birchall’s view, for Mr. Kurganov to have a central role in the $5.7 billion in shares that Mr. Musk had promised to donate.
During this period, Mr. Birchall was a constant presence at Mr. Musk’s side as his boss pursued Twitter. He helped line up billions of dollars in financing and spoke to shareholders and investors on Mr. Musk’s behalf about the future of the social-networking service.
By spring, the Tesla CEO’s bid for Twitter required him to put up tens of billions of dollars in personal funding and was consuming much of his attention. Meanwhile, Tesla’s stock was dropping as the broader market pulled back, pinching Mr. Musk’s net worth.
Mr. Birchall in May asked Mr. Musk to remove Mr. Kurganov from his post at the foundation.
Mr. Musk agreed to let Mr. Kurganov go, the representative of the foundation says.
None of Mr. Musk’s money was ultimately spent on projects related to effective altruism, the representative says, and Mr. Kurganov’s Musk Foundation email was switched off roughly six weeks ago.
—Elisa Cho and Rebecca Elliott contributed to this article.
Tesla and SpaceX didn’t respond to requests for comment.
Tesla, still the world’s most valuable auto maker by far, earlier this month reported its first sequential decline in quarterly deliveries in more than two years, largely reflecting supply-chain disruptions and an extended factory shutdown in China because of Covid-19-related lockdowns there.
Elon Musk leaving court after testifying at the SolarCity trial in Wilmington, Del., last year.
Photo:
Samuel Corum/Bloomberg News
Mr. Musk also recently described the company’s new plants in Germany and Texas as “gigantic money furnaces.” The factories opened earlier this year, but the company has struggled to increase production at both, Mr. Musk said.
“Berlin and Austin are losing billions of dollars right now because there’s a ton of expense and hardly any output,” he said in a late May interview with a Tesla owners’ club. Mr. Musk, who has been expressing concerns about the global economy, initiated a round of job cuts at the car maker last month.
Tesla’s production challenges, some of which have been largely out of the company’s control, threaten to waste a “golden opportunity” to get electric vehicles to market ahead of rivals, said Gene Munster, a managing partner at research and investment firm Loup Ventures.
“You just can’t give oxygen to your competitors,” said Mr. Munster, a longtime Tesla watcher whose firm doesn’t hold the company’s stock.
On Wednesday,
Andrej Karpathy,
a longtime executive who played a key role in developing Tesla’s advanced driver-assistance system known as Autopilot, said he was leaving the company. Mr. Musk, on Twitter, thanked Mr. Karpathy for his contributions.
Last year, Mr. Musk warned that if a severe global recession dried up capital availability and liquidity while SpaceX was losing billions on its Starship rocket program and its satellite-broadband service, bankruptcy wasn’t impossible. The space company was the busiest U.S. rocket-launch provider last year, handling both human flights and satellite missions.
Tesla has struggled to increase production at its Texas manufacturing facility that opened earlier this year, Elon Musk has said.
The entrepreneur said he visited a company launch site in Texas after a fiery explosion on Monday under one of the company’s Super Heavy boosters. Those towering vehicles underpin the Starship rocket system, which Mr. Musk has said Space Exploration Technologies Corp., as the company is formally known, plans to use for its most ambitious missions, including a prospective human voyage to Mars.
The National Aeronautics and Space Administration is also counting on a version of Starship to ferry astronauts to the surface of the moon as soon as 2025.
“Yeah, actually not good,” Mr. Musk wrote on Twitter in response to the explosion, saying a SpaceX team was assessing the damage. He added that the booster’s base appeared sound, though SpaceX shut down the launchpad for safety reasons. Later, he tweeted: “Damage appears to be minor, but we need to inspect all the engines.”
Jeffrey Hoffman, an aerospace engineering professor at Massachusetts Institute of Technology and former astronaut, said SpaceX faces significant hurdles developing Starship, including showing that the engines clustered under its Super Heavy boosters are able to function as designed. “The parallel operation of 33 rocket engines at the same time is a big deal,” he said, referring to the design.
SpaceX, alongside other satellite companies, is also embroiled in a regulatory battle against
Dish Network Corp.
and others as the Federal Communications Commission mulls new rules for the radio frequencies used to carry its signals.
SpaceX rebounded after a Falcon 9 rocket exploded in Cape Canaveral, Fla., in 2016, destroying a Facebook satellite.
Photo:
U.S. Launch Report//Reuters
Soaring inflation is weighing on both Tesla and SpaceX, Mr. Musk has said. Some Tesla suppliers are requesting 20% to 30% more for parts than they did last year, Mr. Musk said in April, when the company reported record quarterly profit.
Meanwhile, some SpaceX employees signed a letter raising concerns and frustration over the CEO’s recent public statements and behavior, describing them as a source of embarrassment and distraction. The company fired at least some of the staffers involved in the effort.
Gwynne Shotwell,
SpaceX’s president, said the letter distracted employees and upset many of them.
Mr. Musk is also a founder of Boring Co., a tunneling enterprise, and Neuralink Corp., a neuroscience startup working on brain-implant technologies. He has at times bemoaned the workload he has heaped on himself. “It would be nice to have a bit more free time on my hands, as opposed to just working day and night from when I wake up till when I go to sleep seven days a week. It’s pretty intense,” he said last year during a Tesla analyst briefing.
Deep business challenges at Tesla and SpaceX are nothing new for Mr. Musk. The auto maker nearly went bust in 2018, Mr. Musk has said, as it struggled to increase production of its Model 3 sedan, the car that helped turn Tesla from a niche player to a mass market auto producer. Mr. Musk at one point slept on the factory floor of what was then the company’s lone U.S. car plant, in Fremont, Calif., to work through what he called “production hell.”
Once those problems were overcome, Tesla’s stock began its meteoric rise that helped turn Mr. Musk into the world’s richest man and padded the company’s coffers. Tesla was sitting on around $17.5 billion in cash as of the first quarter.
Closely held SpaceX has dealt with setbacks in its business before. For instance, one of the company’s Falcon 9 rockets exploded during a test in 2016, destroying a Facebook satellite. At the time, it was the second catastrophic failure of such a launcher in 15 months. The company made adjustments and recovered. Four years later, it launched two NASA astronauts to the International Space Station, or ISS, the first launch of humans into orbit from U.S. soil since the agency’s last shuttle mission in 2011.
Mr. Musk’s businesses have notched notable successes in recent months. In addition to its record profits earlier in the year, Tesla reported its highest-ever vehicle production in June, with output at the Shanghai plant recovering. That month, NASA said it intended to hire SpaceX to handle five additional crewed flights to the ISS, a plan that would add to the nine flights the agency had already acquired under a contract valued at about $3.5 billion.
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SpaceX also regularly blasts satellites to orbit for commercial customers and U.S. spy agencies, while Starlink, its satellite-internet business, recently won regulatory approval to provide service to planes, boats and recreational vehicles.
Tesla’s share price has fallen more than 40% from its November high, but the company’s roughly $737 billion valuation as of Wednesday was still higher than the next eight auto makers combined. SpaceX’s valuation this year reached around $125 billion after it raised more than $1.7 billion, topping that of more established aerospace powerhouses Boeing Co. and
Lockheed Martin Corp.
Write to Rebecca Elliott at rebecca.elliott@wsj.com and Micah Maidenberg at micah.maidenberg@wsj.com
sent shares of the social-media company tumbling, as investors prepare for what is expected to be a messy courtroom battle.
Twitter shares fell 9.7% to $33.26 in midday trading. The move follows Mr. Musk’s disclosure to securities regulators Friday that he is seeking to abandon his $44 billion deal to buy Twitter and take it private, saying that the company hasn’t provided the information he needs to assess the prevalence of fake or spam accounts.
Twitter stock is trading about 38% below the $54.20-a-share price at which Mr. Musk agreed to buy the company in April, marking a stunning turnaround for what has been considered the buzziest deal of the year. Its shares also are trading below where they were in early April before Mr. Musk took a surprise 9% stake in the company, which officially kicked off his takeover attempt.
Mr. Musk’s bid to buy Twitter has spurred a wild ride in shares of both
Tesla Inc.
and the social-media company at a time when stocks around the globe have been falling. Mr. Musk is chief executive of the electric-car maker and sold Tesla stock this year after agreeing to buy Twitter.
News of the acquisition initially triggered a rush of activity in Twitter shares and options, with many individual investors piling in. Purchases of Twitter shares among individual investors swelled to about 11 times the monthly average since 2020 in April, when Mr. Musk initially made a bid for the company.
Since then, shares of both companies have fallen into a deeper slump. Tesla’s and Twitter’s shares have tumbled around 29% and 35%, respectively, since the deal was announced, compared with a roughly 10% drop for the S&P 500.
Fears about inflation and a potential recession on the horizon have dragged stocks sharply lower and especially punished shares of technology companies.
The technology-focused Nasdaq Composite is down 27% for the year, as investors have dumped shares of tech behemoths and nonprofitable growth companies alike. Twitter also faces a darkening outlook for digital advertising, and, just last week, laid off 30% of its recruitment team.
Mr. Musk’s drama with Twitter has injected even more volatility into shares of Tesla, a stock notorious for its wild swings. Some Tesla fans said they were concerned that Mr. Musk would lose focus from the electric-vehicle maker with the new initiative, which weighed on the company’s shares.
Tesla shares have remained the most popular bearish bet in the U.S. market for investors during the turbulence this year. The slide in the stock also has made it the most profitable short position, according to S3 Partners data as of July 1.
Tesla’s stock already got a boost last week and was among the biggest gainers in the S&P 500, as concerns about the deal falling through swirled. On Monday, Tesla shares fell 5.8% to $708.54.
Now, investors, lawyers and onlookers are bracing for what could be one of the most unusual legal battles in corporate takeover history—a drama reflected in Twitter’s gyrating stock. As of Friday, the social-media company had lost more than $11 billion in market value from its closing high of $51.70 in April.
So far, traders in the options market have been wagering that the deal will eventually fizzle.
“Right now, the options market is leaning more towards they won’t” do a deal, wrote Amy Wu Silverman, a managing director at RBC Capital Markets, in a note to clients.
Two sharply different dynamics have been playing out in the market for Tesla and Twitter options, according to Ms. Wu Silverman. A measure of expected volatility in Tesla has been dropping, while it has been rising for Twitter. Traders have been paying more to protect against further losses in Twitter stock through the options market, while the cost of such insurance has edged lower in Tesla options, according to Ms. Wu Silverman.
Even ahead of Mr. Musk’s regulatory filings late Friday, Tesla options tied to the shares jumping to $760 were among the most popular in the entire market, according to data provider Trade Alert. They were behind only bets tied to the broader S&P 500 and
Apple Inc.
stock.
In his bid to terminate the deal, Mr. Musk said Friday that Twitter had violated the agreement, arguing that it was making critical changes to the ordinary running of the business without his consent. He also accused the company of withholding data from him. Mr. Musk doubled down on his view in the early hours of Monday with a series of characteristic memes and replies to users on Twitter.
Twitter has said previously that it has and will continue sharing information with Mr. Musk. The company now says it will pursue legal action, arguing Mr. Musk is required to close the agreed-on deal.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Gunjan Banerji at Gunjan.Banerji@wsj.com
U.S. stocks fell to start the week as investors prepare for fresh inflation data and corporate earnings that could influence the Federal Reserve’s path ahead for interest-rate increases.
The S&P 500 fell about 1% as the broad-market index started the week off on a negative note. The Nasdaq Composite Index shed 1.9% as technology stocks lost ground. The Dow Jones Industrial Average was 0.4% lower.
Stocks staged a recovery in recent days, with the S&P 500 rising nearly 2% last week. The rally cooled on Friday after a stronger-than-expected jobs report showed the labor market is still hot, raising the probability that the Federal Reserve could continue with aggressive interest rate increases and potentially cause a recession. The next key data release, the U.S. consumer-price index for June, is on Wednesday.
“It’ll be interesting to see how the market trades following that news,” said
Charlie Ripley,
senior investment strategist for Allianz Investment. “It doesn’t appear like we’re going to have a decline in inflation any time soon.”
Investors are also awaiting corporate earnings reports for indications of how much higher prices and weaker consumer sentiment have eroded companies’ profits. Americans expect lower inflation increases over the longer run, a new Federal Reserve Bank of New York report said.
“We’re in a backdrop where central banks are going to continue raising interest rates and the underlying market narrative continues to be one of potentially rising recession risks. We’re going to see markets react to different data points, react to earnings,” said
Laura Cooper,
a macro strategist at BlackRock. “That sets us up for quite a volatile period ahead.”
“We’re cautious on equities, we’re not advocating for ‘buy the dip’ at this current juncture,” Ms. Cooper said.
Major financial firms including JPMorgan Chase and Morgan Stanley are scheduled to report earnings on Thursday, followed by BlackRock, Citigroup and Wells Fargo on Friday. KBW Nasdaq Bank Index was down about 1% in recent trading.
Many household-name firms are also set to post earnings this week, including PepsiCo on Tuesday and
Delta Air Lines
on Wednesday.
“These are going to be huge bellwethers on consumer confidence, on spending. The guidance will be really important, these guys have incredible insight about how the consumer is behaving and how they expect this to evolve over the rest of the year,” said
Fahad Kamal,
chief investment officer at Kleinwort Hambros.
Twitter
TWTR -9.26%
fell 8%.
Elon Musk
filed a statement on Friday evening, saying he was terminating his $44-billion bid for the social-media company, saying it had violated the merger agreement. Twitter also put out a statement indicating it will sue Mr. Musk.
A look at the markets shows asset managers are moving money around in ways that suggest they see a recession coming. WSJ’s Dion Rabouin explains what to look for and why they tell us investors are increasingly pricing in a recession. Illustration: David Fang
Other tech stocks fell, with
Facebook
parent Meta Platforms recently down 4.4% and
Netflix
lost 3.7%. Shares of
Broadcom
were down 3.2% after after the microchip company announced the departure of its president.
Bond markets continued to flash a key warning sign. The U.S. yield curve remained inverted, with yields on shorter-dated bonds above those of longer-dated debt. The yield on the benchmark 10-year Treasury note edged down to 2.994% from 3.098% on Friday. The two-year Treasury yield was at 3.035%.
Oil prices extended their decline. Brent, the global benchmark for crude, retreated 1.5% to trade at $102.86. It fell more than 4% last week.
It is about “the concern that we are going to see a sharp decline in demand on the back of the deteriorating growth backdrop,” Ms. Cooper said. “That’s notably playing out in the commodity space.”
Cryptocurrencies also came under more pressure. Bitcoin traded around $20,500, a 6% drop from its level at 5 p.m. ET on Friday. Ether tumbled 8%.
Overseas, the pan-continental Stoxx Europe 600 slid 0.4%, while the euro continued to trade near parity with the U.S. dollar. The Nord Stream pipeline which transports Russian gas to Germany and other Western European countries shut for planned maintenance starting Monday.
Uniper
fell 16%, extending last week’s 30% plunge. The utility has asked for a bailout from the German government, saying it has been hit by dwindling gas supplies.
JPMorgan Chase and Morgan Stanley will report earnings later this week.
Photo:
BRENDAN MCDERMID/REUTERS
In Asia, most major benchmarks declined. Chinese stocks dropped after Shanghai reported its first local case of the BA.5 Omicron subvariant on Sunday, and the country recorded more than 2,300 locally transmitted Covid-19 cases nationwide over the last seven days. The Shanghai Composite Index slipped 1.3% and Hong Kong’s Hang Seng Index fell 2.8%.
Officials in Macau set a weeklong shutdown of casinos and other businesses to combat the surge in cases. Gambling stocks tumbled, with
Sands China
sliding 8.2%,
Wynn Macau
shedding 6.7% and
Galaxy Entertainment Group
down 4.9%.
Over the weekend, Beijing fined some of the country’s largest internet companies for failing to make proper antitrust declarations, weighing on tech stocks.
Alibaba,
Tencent Holdings and Ping An Healthcare & Technology, which were named in the latest executive punishment notices, fell 5.8%, 2.9% and 3.4%, respectively.
In Japan, the Nikkei 225 index rose 1.1% on Monday after current Prime Minister Fumio Kishida’s ruling coalition won the majority of parliamentary seats in an election on Sunday. The Japanese yen dropped to a fresh 24-year low of more than 137 against the dollar.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com, Rebecca Feng at rebecca.feng@wsj.com and Pia Singh at Pia.Singh@wsj.com
Corrections & Amplifications Beijing fined tech companies for failing to make proper antitrust declarations over the weekend. An earlier version of this article incorrectly said it happened on Monday. Also, China recorded more than 2,300 locally transmitted Covid-19 cases nationwide over the last seven days. An earlier version of this article incorrectly said the country reported 3,300 locally transmitted cases nationwide over the weekend. (Corrected on July 11)
“‘A friend of mine died of colon cancer this week. She was 39. Two years ago, after marrying her incredible wife, she asked her doc for a colonoscopy. Her father had died young of colon cancer, putting my friend at higher risk, and it was on her mind. She wanted a screening. She was told no.”
A Twitter
TWTR,
+1.44%
thread about a woman who recently died at 39 from colorectal cancer has spotlighted awareness about the proper age to begin screening for the often-fatal disease. It has also raised questions about how seriously the medical system takes health concerns among women.
Caitlin Gibson, a reporter at the Washington Post, shared the story Monday about the woman, a friend of hers, on the social-media platform. The thread has since received thousands of retweets.
Gibson said her friend thought she was at higher risk for colorectal cancer because her father had died of the disease. Gibson noted that her friend, who goes unnamed, sought to get a colonoscopy two years ago, but her “insurance wouldn’t pay for it.”
In addition, Gibson said when her friend started experiencing abdominal pain, doctors told her it was likely gallbladder-related. By the time her friend was finally diagnosed with colorectal cancer, the disease had already progressed to stage four.
“She was not surprised. She was enraged,” Gibson wrote. “And for everyone who loves her, the fury adds an entirely new dimension to the grief. This should have been preventable, if she’d been given access to the early screenings she knew she needed because of her hereditary risk.”
Gibson didn’t immediately respond to a MarketWatch request for comment.
“ ‘This should have been preventable, if she’d been given access to the early screenings she knew she needed because of her hereditary risk.’”
Colorectal cancer remains a leading cause of death in the U.S. The American Cancer Society estimated that 149,500 new cases would be diagnosed in 2021, resulting in 52,980 deaths. That makes the disease the second-most fatal form of cancer in the U.S.
And the rates of colorectal cancer among those under age 50 are on the rise, according to the American Cancer Society. The issue became particularly discussed when beloved “Black Panther” star Chadwick Boseman died of the disease at age 43.
Last year, a prominent medical panel advised that colorectal cancer screenings should begin at age 45 instead of the previous recommendation of 50.
On top of the issue of colorectal cancer affecting younger people, Gibson’s thread also pointed to the challenges that many people face when dealing with the medical system.
“This system is so deeply broken,” Gibson wrote. “Especially for women, whose intuition and pain is not taken seriously. Especially for people without the right kind of access or money or privilege.”
Such issues have been raised by many others. For example, a study in the journal “Academic Emergency Medicine” found that women seeking help for severe stomach pain had to wait in the emergency room considerably longer than men with the same condition.
And those who have responded to Gibson’s thread have shared stories of being misdiagnosed or ignored by doctors, only to face severe consequences, such as eventually finding out they had skin, breast or colon cancer.
Gibson’s thread included a link to a poem, “Antidotes to Fear of Death,” by Rebecca Elson. As its title implies, the poem offers a vision of hope, comfort and bravery in the face of death.
was “temporarily on hold” because of concerns about fake accounts, a surprise twist that jolted investors and raised questions about his willingness to go through with the $44 billion transaction.
Mr. Musk’s grenade came in a tweet posted at 5:44 a.m. Eastern Time that was followed just over two hours later by another saying he was “still committed to acquisition.” Lawyers close to Mr. Musk urged him to send that follow-up tweet, according to people familiar with the matter.
The initial announcement was unorthodox not just in its timing and format, but because Mr. Musk referenced a recent Twitter disclosure about fake and spam accounts that it has made consistently for years—and because Mr. Musk has already signed an agreement for the purchase and waived detailed due diligence on the deal.
The sudden shake-up fueled questions about whether Mr. Musk is committed to a deal that was struck amid a sharp decline in technology stocks that has made Twitter less valuable on paper than it was a month ago when he made his offer of $54.20 a share. Twitter shares, which were already trading well below that level, closed down 9.7% in afternoon trading at $40.70.
People in Twitter’s camp said Mr. Musk’s first tweet was a surprise and that he hadn’t reached out to the company ahead of time. But they played down its significance and said the second tweet, indicating that the deal is still on, is the one that matters. The company continues working to complete the acquisition and is supplying Mr. Musk with all the relevant information under the terms of the contract, according to a person familiar with Twitter’s response.
Twitter CEO
Parag Agrawal
on Friday said “while I expect the deal to close, we need to be prepared for all scenarios,” a day after he internally announced a hiring freeze and cost cuts.
Mr. Musk was aware of questions about fake and spam accounts on Twitter when he agreed to the acquisition—he has raised concerns about it in his own tweets for years. In Friday’s post on his verified Twitter account, he said: “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.”
He linked to a May 2 report about a Twitter securities filing that said it estimates that false or spam accounts represented fewer than 5% of its daily active users. The company has reported the same figure in its annual reports since it went public in 2013.
It couldn’t be determined if the latest tweets were a negotiating tactic to abandon the transaction or reprice the deal.
The tweets come as many big tech stocks have been falling on Wall Street, including shares of Tesla, which retreated 29% since Mr. Musk’s investment in Twitter became public. Mr. Musk is using his Tesla holdings to help fund the Twitter deal. Meanwhile, Twitter’s stock price had traded below Mr. Musk’s offer price as investors wondered if the deal might get reworked or not get done.
Susannah Streeter,
an investment analyst at
Hargreaves Lansdown,
said there will be skepticism whether the fake accounts are the real reason for the delaying tactic. “The $44 billion price tag is huge, and it may be a strategy to row back on the amount he is prepared to pay to acquire the platform,” she said.
After Hindenburg Research LLC, an activist short seller, this week called the Twitter deal overpriced and said that there is “significant risk” it could get repriced lower, Mr. Musk tweeted in response: “Interesting. Don’t forget to look on the bright side of life sometimes!”
If the deal does fall apart, Mr. Musk could owe Twitter $1 billion depending on the reason for the breakup. The size of the breakup fees, at just over 2% of the deal value, is about average for similar transactions. Also called termination fees, the penalties are meant to deter parties from breaking agreements and address the expense and inconvenience of a failed deal.
Because Mr. Musk waived doing detailed due diligence on the deal, it could make it more difficult for him to back out over something like a discrepancy in the number of spam accounts. If he tries to, the company could attempt to force him to complete the deal under a legal protection called “specific performance,” though that maneuver is rarely successful in practice.
In 2020, luxury-goods conglomerate
LVMH Moët Hennessy Louis Vuitton SE
tried to back out of a deal to buy Tiffany & Co. for $16.2 billion after the pandemic hurt demand for high-end jewelry. Tiffany sued to enforce the agreement and LVMH countersued, arguing the business had been so deeply damaged that their original agreement was no longer valid. The two sides later agreed to cut the price by a relatively modest $430 million and settle related litigation.
Mr. Musk’s initial tweet Friday could be seen as critical of Twitter, which could further complicate things. The merger agreement stipulates that he can tweet about the deal so long as he doesn’t disparage the company or any of its representatives.
Before Friday, Mr. Musk had appeared to be moving forward on the deal in meetings with Twitter and hadn’t attempted to restart negotiations, but he had started asking questions about the number of spam accounts on the platform, people familiar with the matter said. A Twitter spokesman said Mr. Musk had visited the company May 6 as part of the transaction-planning process.
Twitter has warned that its estimate of fake and spam accounts is based on a sampling of accounts and that “the actual number of false or spam accounts could be higher than we have estimated.”
Mr. Musk’s tweets Friday are the latest twist in the unorthodox attempt to take over the social-media giant by the world’s richest man. It began with Mr. Musk buying a large chunk of Twitter shares on the open market earlier this year as a passive investor, which soon turned into a full-fledged buyout offer, outlined in a four-paragraph letter and several text messages to Twitter’s chairman.
Elon Musk has cultivated close ties with Beijing to build Tesla’s business in China. Now that he is buying Twitter and focusing on free speech, WSJ looks at how China has used the social-media platform to promote its views, and why that’s raising concerns. Photo Illustration: Sharon Shi
The per-share offer price of $54.20 contained a veiled reference to marijuana. The latest bombshell comes on a superstitious date: Friday the 13th.
Truist Securities analyst
Youssef Squali
said he could see a scenario where Mr. Musk tries reducing the offer price by 15% to 20%, to $46 or $43 a share. “If he’s successful, then his ability to secure funding while lowering his reliance on Tesla shares increases pretty dramatically,” Mr. Squali said.
In addition to financing from Wall Street, Mr. Musk has had to sell at least $8.5 billion worth of Tesla shares to fund the deal. He has also assembled a cast of 19 investors, from a Saudi prince to Silicon Valley stalwarts, to put up another $7 billion.
Meanwhile, federal regulators are investigating Mr. Musk’s late disclosure last month of his sizable stake in Twitter, a lag that allowed him to buy more stock without alerting other shareholders to his ownership, The Wall Street Journal reported Thursday, citing people familiar with the matter.
Mr. Musk made his filing on April 4, at least 10 days after his stake surpassed the trigger point for disclosure. He hasn’t publicly explained why he didn’t file in a timely manner. An attorney for Mr. Musk didn’t respond to a message seeking comment.
Amid Mr. Musk’s takeover attempt, Twitter has been dealing with the disruptions in the digital advertising market from global economic turmoil and the war in Ukraine. The company said Thursday that it was pausing hiring and looking to cut costs and announced the departure of two senior executives.
“Effective this week, we are pausing most hiring and backfills, except for business critical roles,” Twitter’s Mr. Agrawal wrote in a memo, which was viewed by The Wall Street Journal. Twitter’s move adds to broader upheaval in the tech industry in recent weeks in which several companies have been cutting staff and spending or slowing hiring.
—Georgia Wells, Anna Hirtenstein and Dave Michaels
contributed to this article.
Write to Sarah E. Needleman at sarah.needleman@wsj.com and Cara Lombardo at cara.lombardo@wsj.com
