Who – the protagonist
Elon Musk, co-founder of six companies including Tesla, SpaceX and The Boring Company.
What?
On 14 April 2022 Elon made a surprise hostile takeover bid to purchase Twitter’s outstanding stock at US$54.20 per share, a move that would change their public status and make it a privately held company.
Between 2018 and the first quarter of 2022, operating margins had been trending downward and the company’s cash flow showed great volatility after dropping from its peak in 2018.
Competitors such as Facebook, Instagram and TikTok led the way when it came to creating innovative ways to attract, retain, and monetise users.
Nevertheless, Elon spotted an opportunity with Twitter.
Why?
After Twitter had accepted Elon’s offer, the South African entrepreneur subsequently tweeted on 13 May 2022 that the deal was “temporarily on hold”.
Elon claimed that his offer had assumed that “fake” accounts (i.e. accounts operated by robots or ‘bots’) consisted of less than 5% of Twitter’s entire user base, not the 20% that he believed was a more accurate number after conducting his own research.
On 8 July 2022, after contending that Twitter’s board had failed to provide sufficient evidence to alleviate his concerns, Elon announced that he was formally terminating the deal to acquire the company.
Almost immediately, Twitter’s board responded by filing a lawsuit against Elon in the Delaware Court of Chancery, attempting to force him to follow through with the original $44 billion bid.
When?
It was January 2022 when Elon began acquiring an equity stake in Twitter. The purchase was fuelled by his desire to drive changes at the company that would promote free speech.
Where?
Twitter was headquartered in San Francisco, California.
Key quote
What next?
If Elon was to go through with the Twitter deal after all, he had to contend with Tesla’s stock price going down by 40% from January to June 2022, which had an adverse impact on his personal wealth and value of personal Tesla shares.
Meanwhile, proposed changes under Elon such as a reduced reliance on advertising revenues and less censorship would create additional business risk for Twitter.
And would the court rule in favour of Twitter and force Elon to pay the original $44million price?
On the reasons for writing the case…
Frank said: “Elon Musk’s acquisition of Twitter has shocked the world. The ongoing drama attracted frantic media coverage and public attention. We hope to use this opportunity to:
“Provide students with a relevant and timely example: Elon Musk is an influential figure in the business world, especially among the younger generation where he has developed a cult-like following. The companies involved were well known and changed our daily lives. A case like this connects students with timely and rich material that can inspire more thought and engaging discussion.
“Teach important, cutting-edge finance concepts: This case illustrates the key concepts and the latest knowledge in finance, particularly with respect to valuation and deal financing.
“Teach important, cutting-edge corporate law concepts: There are several interesting aspects of the case that are at the intersection of corporate law and finance. Students have an opportunity to learn and think critically about these concepts and how they affect deal valuation.
“Consider ethics: One important ethical consideration surrounding the acquisition is the possibility of conflicts of interest. Elon Musk is the CEO of Tesla and SpaceX, both of which have significant business interests and partnerships with Twitter. The case provides students an opportunity to think about how he might manage these conflicts of interest to ensure that the acquisition is in the best interests of all stakeholders.
“Acquiring Twitter also raises questions about social responsibility. Twitter is a major platform for free speech and public discourse, and its acquisition by a high-profile individual like Elon Musk could have significant implications for the way that information is shared and disseminated online. Students could explore the potential social and ethical implications of the acquisition and consider how he could best act in a socially responsible manner.”
On the case writing challenges…
Frank continued: “The case includes abundant information from different sources and a variety of perspectives and opinions. It was challenging to design a cohesive case that students can easily understand from all the perspectives, and conduct rigorous qualitative and quantitative analyses. Fortunately, we were able to find a way to organise the writing and numbers in a consistent and clear manner.”
On teaching the case…
He added: “I enjoy teaching this case a lot!
“First, it is easy to teach. The case has a well-planned path for valuation analysis and the proposed questions in the teaching note and additional materials help students develop their own analysis step-by-step. The main job an instructor has is to ask the questions. The answers in the spreadsheets provided to instructors are easy to follow.
“Second, it is a rich case that I can tailor to what best fits my curriculum and interests. For example, this year I am emphasising the quantitative analysis of the acquisition. For the qualitative analysis, half of the class performed as Elon Musk and the other half were Twitter shareholders. The debate and negotiation between them was intriguing and fun!
“Finally, it is an ongoing case. There is still a lot of news coming out about Twitter after the acquisition under Musk’s management. I was (and will be) able to pull up the most recent news clippings in class and relate them to the case.”
On how students react to the case…
He explained: “Oh they just loved it! The class was full of energy; even the least engaged students in my finance course were eager to participate in the discussion, and it was easy to retain their attention. Most of the students already knew about this acquisition, and some were even able to provide new information and insights that made the case discussion more interesting. Overall, they thoroughly enjoyed valuating Twitter themselves and debating whether Musk overpaid or underpaid. One student told me after the class that it’s the most exciting case they’ve experienced this year, and it’s the same for me!”
On case writing tips…
Frank concluded: “First, you need to gain case teaching experience, which helps design the structure for your case and teaching note. Second, you need a deep understanding of what you want to teach, which helps you include proper content in the case. Last, with the structure and content in place, you need some creativity to make the case interesting and engaging.”
The case
Who – the protagonist
Elon Musk, co-founder of six companies including Tesla, SpaceX and The Boring Company.
What?
On 14 April 2022 Elon made a surprise hostile takeover bid to purchase Twitter’s outstanding stock at US$54.20 per share, a move that would change their public status and make it a privately held company.
Between 2018 and the first quarter of 2022, operating margins had been trending downward and the company’s cash flow showed great volatility after dropping from its peak in 2018.
Competitors such as Facebook, Instagram and TikTok led the way when it came to creating innovative ways to attract, retain, and monetise users.
Nevertheless, Elon spotted an opportunity with Twitter.
Why?
After Twitter had accepted Elon’s offer, the South African entrepreneur subsequently tweeted on 13 May 2022 that the deal was “temporarily on hold”.
Elon claimed that his offer had assumed that “fake” accounts (i.e. accounts operated by robots or ‘bots’) consisted of less than 5% of Twitter’s entire user base, not the 20% that he believed was a more accurate number after conducting his own research.
On 8 July 2022, after contending that Twitter’s board had failed to provide sufficient evidence to alleviate his concerns, Elon announced that he was formally terminating the deal to acquire the company.
Almost immediately, Twitter’s board responded by filing a lawsuit against Elon in the Delaware Court of Chancery, attempting to force him to follow through with the original $44 billion bid.
When?
It was January 2022 when Elon began acquiring an equity stake in Twitter. The purchase was fuelled by his desire to drive changes at the company that would promote free speech.
Where?
Twitter was headquartered in San Francisco, California.
Key quote
What next?
If Elon was to go through with the Twitter deal after all, he had to contend with Tesla’s stock price going down by 40% from January to June 2022, which had an adverse impact on his personal wealth and value of personal Tesla shares.
Meanwhile, proposed changes under Elon such as a reduced reliance on advertising revenues and less censorship would create additional business risk for Twitter.
And would the court rule in favour of Twitter and force Elon to pay the original $44million price?
Author perspective
On the reasons for writing the case…
Frank said: “Elon Musk’s acquisition of Twitter has shocked the world. The ongoing drama attracted frantic media coverage and public attention. We hope to use this opportunity to:
“Provide students with a relevant and timely example: Elon Musk is an influential figure in the business world, especially among the younger generation where he has developed a cult-like following. The companies involved were well known and changed our daily lives. A case like this connects students with timely and rich material that can inspire more thought and engaging discussion.
“Teach important, cutting-edge finance concepts: This case illustrates the key concepts and the latest knowledge in finance, particularly with respect to valuation and deal financing.
“Teach important, cutting-edge corporate law concepts: There are several interesting aspects of the case that are at the intersection of corporate law and finance. Students have an opportunity to learn and think critically about these concepts and how they affect deal valuation.
“Consider ethics: One important ethical consideration surrounding the acquisition is the possibility of conflicts of interest. Elon Musk is the CEO of Tesla and SpaceX, both of which have significant business interests and partnerships with Twitter. The case provides students an opportunity to think about how he might manage these conflicts of interest to ensure that the acquisition is in the best interests of all stakeholders.
“Acquiring Twitter also raises questions about social responsibility. Twitter is a major platform for free speech and public discourse, and its acquisition by a high-profile individual like Elon Musk could have significant implications for the way that information is shared and disseminated online. Students could explore the potential social and ethical implications of the acquisition and consider how he could best act in a socially responsible manner.”
On the case writing challenges…
Frank continued: “The case includes abundant information from different sources and a variety of perspectives and opinions. It was challenging to design a cohesive case that students can easily understand from all the perspectives, and conduct rigorous qualitative and quantitative analyses. Fortunately, we were able to find a way to organise the writing and numbers in a consistent and clear manner.”
On teaching the case…
He added: “I enjoy teaching this case a lot!
“First, it is easy to teach. The case has a well-planned path for valuation analysis and the proposed questions in the teaching note and additional materials help students develop their own analysis step-by-step. The main job an instructor has is to ask the questions. The answers in the spreadsheets provided to instructors are easy to follow.
“Second, it is a rich case that I can tailor to what best fits my curriculum and interests. For example, this year I am emphasising the quantitative analysis of the acquisition. For the qualitative analysis, half of the class performed as Elon Musk and the other half were Twitter shareholders. The debate and negotiation between them was intriguing and fun!
“Finally, it is an ongoing case. There is still a lot of news coming out about Twitter after the acquisition under Musk’s management. I was (and will be) able to pull up the most recent news clippings in class and relate them to the case.”
On how students react to the case…
He explained: “Oh they just loved it! The class was full of energy; even the least engaged students in my finance course were eager to participate in the discussion, and it was easy to retain their attention. Most of the students already knew about this acquisition, and some were even able to provide new information and insights that made the case discussion more interesting. Overall, they thoroughly enjoyed valuating Twitter themselves and debating whether Musk overpaid or underpaid. One student told me after the class that it’s the most exciting case they’ve experienced this year, and it’s the same for me!”
On case writing tips…
Frank concluded: “First, you need to gain case teaching experience, which helps design the structure for your case and teaching note. Second, you need a deep understanding of what you want to teach, which helps you include proper content in the case. Last, with the structure and content in place, you need some creativity to make the case interesting and engaging.”
Li.jpg)
