Even under Corporate Raiders, Elon Musk is a pirate

The history of mergers and acquisitions is filled with relentless corporate raiders, crushing wars of words, and people trying to rip each other off.

T. Boone Pickens, the oil tycoon who rampaged through the 1980s, took small stakes in energy companies, attacked management and forced the companies to sell. Carl Icahn, the activist investor, amassed company shares and threatened to fire their boards if they didn’t agree to a deal. And Robert Campeau, the Canadian real estate investor known for tech buyouts, wasn’t afraid to take legal action against companies seeking to fend off his advances.

But even with all those killer tactics, the deal-making world has never seen a buyer like Elon Musk.

In the weeks since Mr. Musk, the world’s richest man, signed a $44 billion deal to buy social media service Twitter, he has turned the deal landscape on its head. When two parties agree to negotiate an acquisition, they usually spend weeks studying finances and working out details. The action usually takes place behind closed doors, in boardrooms and at prestigious law firms and investment banks.

But Mr. Musk waived due diligence to finalize the Twitter deal, according to legal documents. Since then, he has publicly criticized Twitter’s service — on Twitter, of course — attacking some of its top executives and releasing tweets to taunt the company’s board. And with memes and a poo emojihe appears on social media to try to renegotiate the price of the deal down.

Essentially, Mr. Musk, 50, has retrospectively turned what was largely a friendly deal into a hostile takeover. His actions have left Twitter, regulators, bankers and lawyers confused about what he might do next and whether the blockbuster deal will be completed. And Mr. Musk has made previous corporate robbers look very strange by comparison.

“Elon Musk is playing in his own gray area — you could almost say in his own rules,” said Robert Wolf, the former chairman of the Americas for Swiss bank UBS. “This is definitely a new way” of making deals, he said.

Mr. Musk did not respond to a request for comment.

On Thursday, Twitter executives said at a company meeting that Mr. Musk’s purchase was moving forward and that they would not renegotiate, according to two attendees who spoke on condition of anonymity. Earlier this week, the company’s board also stated, “We intend to complete the transaction and enforce the merger agreement.”

Twitter’s board has argued that it has legal preponderance with the deal. In addition to a $1 billion severance fee, the deal with Mr. Musk includes a “specific performance clause,” which gives Twitter the right to sue him and force him to close or pay the deal, as long as the debt financing he has correlated remains intact.

“He signed a binding agreement,” Edward Rock, a professor of corporate governance at New York University School of Law, said of Mr. Musk. “If these agreements are unenforceable, that’s a problem for every other deal out there.”

Twitter did not respond to a request for comment.

Mr. Musk has already pushed some legal boundaries. The Federal Trade Commission is investigating whether the billionaire violated disclosure requirements by failing to notify the agency that he acquired a significant stake in Twitter earlier this year, a person with knowledge of the investigation said. Investors typically must notify antitrust regulators of major stock purchases to give government officials 30 days to review the transaction for competition violations.

The FTC declined to comment. The Information, a tech news site, previously reported on the FTC’s interest in Mr. Musk.

The corporate mercenary archetype has been around for decades. Jay Gould, a late 19th century robber baron who helped build America’s railroad network, funded deals in part with wealth he had amassed through his Wall Street gambling games. He consolidated dying railroads and was known for spreading rumors in the press.

Gould, wrote one of his biographers, Edward Renehan Jr., was a “maestro of the margins” who “was able to create capital out of thin air and gain control over companies using just a few dollars invested in a hall of financial mirrors: nice houses of convertible bonds, proxies and leveraged cash.”

In that same decade, Mr. Campeau buyouts to build a retail empire that included Bloomingdale’s and Abraham & Straus, which eventually succumbed to the debt he had loaded on them. Also emerged a new breed of hostile raider—private equity firms—using prisonerless takeover tactics memorably chronicled in “Barbarians at the Gate,” a 1989 book about the private equity firm KKR and its acquisition of RJR Nabisco.

In recent years, deals that have fallen apart or renegotiated have not been uncommon. After student loan giant Sallie Mae sold itself to a consortium of financial firms for $25 billion in 2007, a credit crunch erupted and new legislation threatened finances. The buyers tried to rescind the deal, the insults flew by and the attempt collapsed.

That same year, a $6.5 billion deal by Apollo Global Management — a combination of a chemical company that owned it, Hexion, with a rival, Huntsman — collapsed when Huntsman’s revenues plummeted and both parties filed a lawsuit. In 2016, telecom giant Verizon cut the price of $4.5 billion for Yahoo’s Internet operations after Yahoo disclosed it had suffered a massive security breach.

But in many of those deals, demonstrable “material adverse changes” — be it a financial crisis or a security breach — were behind a price change or the end of an acquisition. That’s not the case now with Twitter and Mr. Musk, where no obvious factor has emerged to try to change the contours of the agreement. (Mr. Musk, who has taken up the matter of the number of bots on Twitter, has said he doubts the veracity of the company’s public filings.)

Mr. Musk seems to be free to do as he pleases with deals, in part because of his extraordinary personal wealth, which has a net worth of approximately $210 billion and allows him to ignore the economics of a deal. And unlike a private equity firm, it doesn’t buy multiple publicly traded companies per year, making it less important to present itself as a consistent shutter.

While Mr. Musk is accountable to shareholders in other companies he runs, including publicly traded automaker Tesla, those shareholders generally invest in his efforts because he is an inventor, not because he is a dealmaker.

Ann Lipton, a professor of corporate governance at Tulane Law School, said that much of what keeps the M&A world in check are “reputational sanctions.” But Mr. Musk, she noted, “don’t care about reputational sanctions.”

And that leaves just about anyone guessing.

Mike Isaac and Cecilia Kango reporting contributed.