On Monday, Elon Musk sent a letter to Twitter, letting the company know he would no longer be spending $44 billion to buy it because there are too many spam bots. Of course, that's one of the main reasons he said he was buying Twitter in the first place but it now appears he changed his mind.
In response, Twitter filed a lawsuit on Tuesday, saying "sorry, you can't just change your mind, we had a deal." Technically, Twitter is right. Basically, it wants Musk to keep his word. Of course, making that happen depends entirely on convincing a judge to force Musk to fulfill his obligations under the agreement.
Twitter's argument is pretty simple. You don't even have to read very far into the lawsuit before you get to the point. It's right there in the second paragraph:
In April 2022, Elon Musk entered into a binding merger agreement with Twitter, promising to use his best efforts to get the deal done. Now, less than three months later, Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests.
Musk's lawyers, on the other hand, have said he is justified in backing out since Twitter has refused to comply with his requests for information about spam and bots -- a claim the company denies. Instead, Twitter says, Musk is facing a serious case of buyer's remorse in light of a dramatic drop in the share price of Tesla, and the economy in general:
After the merger agreement was signed, the market fell. As the Wall Street Journal reported recently, the value of Musk's stake in Tesla, the anchor of his personal wealth, has declined by more than $100 billion from its November 2021 peak.
So Musk wants out. Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter's stockholders.
It seems pretty obvious this is the reason Musk has changed his mind. His personal wealth has decreased, making the deal a lot more expensive. Also, none of the other reasons he says he's backing out are true, at least not according to Twitter. It seems like he just doesn't think contracts and promises really matter that much.
I'm not a lawyer, but I suspect a judge will likely disagree with that notion. Will there be consequences for Musk? I don't know. That's a complicated question and it depends a lot on how far Twitter is willing to go in forcing a sale to a buyer who is clearly not interested, or what a judge might decide to do about the mess in a courtroom.
Generally speaking, Musk doesn't seem like the type of person who is held accountable very often. The thing is, even if a judge doesn't force him to buy Twitter, that doesn't mean there aren't consequences. It might not look like it on the surface, but certainly, there are real consequences in terms of Musk's credibility.
That might not seem a big deal. After all, Musk is the wealthiest person in the world, what he lacks in credibility he can make up for in money, right? Except Musk is the CEO of a public company -- Tesla. And Musk's credibility is Tesla's credibility.
There are, for example, people who won't buy a Tesla because they don't like Musk's antics or the drama. More importantly, there are people who won't work for Tesla or SpaceX because they don't want to work somewhere they can't trust the leader.
Also, it's not entirely unforeseeable that someday Musk might want to buy some other high-profile company for real, and that company might say "sorry, we saw what happened last time, and we don't think it's in the interests of our shareholders to go through the charade only to have you trash our stock price and then back out."
That's why this is such a brutal truth that every leader should embrace: Your word matters. It can be easy to think that it's fine to break your word -- after all, if you're the boss, who will hold you accountable? The thing is, it doesn't work that way. You are accountable to do what you said you'll do, even if it no longer serves your personal interests.
Sometimes it doesn't seem like a big deal, but it is -- your word matters. It matters when you make a promise. It matters when you say you'll do something. It matters even when you think it's such a small thing no one will care. It matters even when you think you were "just joking."
Leadership is all about influence, and influence is all about trust. Once you lose those, it's awfully hard to lead -- and that's not a joke at all.