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Comment by DelaneyM | Hacker News Reader

For anyone thinking he can pay the 1B$ termination fee and walk away, it's not that simple.

The 1B$ is a "reverse breakup" fee, and applies when an outside force (like SEC or financing) prevents the deal. That 1B$ has nothing to do with any choices on either side, and is unlikely to factor into this process.

At this point they're clearly going to trial, and it's not unlikely that the cost to Elon will be somewhere in the neighborhood of the difference between the fair current market value (~20B$?) and the purchase price (~44B$).

My guess is it'll end up being ~10-15B$.

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Having to spend $15B as the cost for making an impulsive decision (when you can afford it) is a first world problem.

When does a decisions stop being impulsive? Probably at point when enough lawyers are hired to write a contract...

It probably depends on how much you need to think about it. If you have a minion to whom you can say "I'd like to buy Twitter, go figure it out, then let me know where to sign", there's a lot of room for being impulsive.

Tesla and SpaceX success is depending on the public opinion of Musk. If he ends up paying 15 billion (or whatever the number is) over a botched take over, one that had a negative impact on Tesla shares, this opinion might just change. In which case Teslas future preception as a tech company might be at risk.

> Tesla and SpaceX success is depending on the public opinion of Musk

No it does not, SpaceX results speak for themselves, they have no competition. Same with Tesla, just check their vehicles sold charts.

SpaceX competition: Arianne space and a bunch of upstarts, plus every other commercial launch service excluding the Russians at the moment.

Tesla's competition: every other car marker.

The other space companies don't have the cost structure advantages of reusability.

An advantage that we cannot be sure exists to begin with since SpaceX isn't piblishing financials. And for some launches Arianne Space is already now competitive using the Arianne 5, by all means an out dated design, one that was initially intended to carry a European space shuttle into space.

More generally so, I have no idea why people expect any company to own a market completely. Any market is usually big enough for one than one company to be successful.

Spacex has literally no competition. No one else has reusable rockets and starship will soon be a rapid reusable heavy launch vehicle.

Just pray that the cost isn't 10 times normal one and can only be used 9 times.

SpaceX's product isn't reusable launches it's just launches, the reusability is their competitive advantage. There's a lot of other launch providers out there.

It might also be the kind of wake-up call that gets him to be less impulsive.

It's also a world first problem

When has there ever been a lawsuit of this sort that was anywhere near $15 billion? What do you base these numbers on?

When has a billionaire ever signed a contract for a $44 billion deal this recklessly?

There aren’t many people stupider than Tesla investors so he’s almost certainly the dumbest self-made billionaire I can think of.

On the agreement he signed, maybe?

As in my post, assuming this reaches a "negotiated" settlement there are going to be two important values: the original purchase price (OPP), and the fair market value (FMV).

If Twitter "wins", they get Elon to pay the full market value. Now, they don't actually want Elon to be involved, so if Elon pays the difference between FMV and OPP (~$24B) that's essentially the same as buying then divesting with fewer steps.

If Elon "wins", he gets out paying nothing.

So the range is 0 to $24B.

Elon has a terrible case here, so the best negotiating tactic he has is being a disruptive asshole so TWTR just wants it done with (this is playing to his strengths). I'm also making a big assumption about the FMV, which could easily rebound a bit by EOY. With those factors pulling it down from 24, I'm expecting in the 10-15 range, and if I had to guess I'd say $12.5B.

Pick your own inputs for your own estimate, but this is the deal structure.

If Elon wins his claim that they breached contract, he will be able to go after them for damages. It's pretty clear Twitter was lying and fudging fake user numbers, the question is how much and whether that was a breach of contract.

He won't, because 1) there was nothing in the contract about bot numbers and 2) Twitter probably isn't lying about mDAUs and bots.

1) The contract states they are obligated to provide information, Elon alleges such information was withheld or curtailed - a contract violation. There doesn't need to be a specific clause about a particular metric because the obligation to provide information is broad.

2) Facebook lied about video watch time for years, including in SEC filings and to advertisers (essentially fraud). Is this an appeal to the sanctity of SEC filings? I don't think Facebook is significantly more reputable than Twitter, they're both pretty shady.

Why should we just trust the company, as you imply? Companies routinely and regularly lie in SEC filings, including big tech -- and Twitter! They paid close to a billion in securities settlements for - wait for it - lying about user engagement!

Twitter admitted to lying about user engagement in 2015 and paid a hefty fine for it. [1]

Is your argument really "the company that has been proven to lie about user engagement wouldn't lie this time"? Seems flimsy.

[1] https://www.wsj.com/articles/twitter-to-pay-809-5-million-to...

Contract violations are more complex than that. You can’t simply void a contract over a little technicality. Even if they had given him the data, he wouldn’t have been able to get out of the contract. So a judge is not going to look at that and say, “oh yeah, Musk was paying $44B for the company and the right to review its data, so unless he gets both he pays nothing.” The judge is going to go, “okay the company is worth nominally $44B and reviewing data is worth zilch in light of the rest of the contract, so these aren’t equal parts.”

1) They provided access to their firehose API, how is that not enough? The crap about rate limiting doesn't apply to the firehose, and decent engineers can get around rate limiting, so either way this doesn't hold up.

2) Twitter's CEO gave a pretty good explanation of how they combat bots and how they calculate their mDAUs, Elon Musk responded with a poop emoji. I get that his personal experience on Twitter is heavily bot-infested, a significant proportion of bots on Twitter engage with his account and use his image as a user profile. Twitter doesn't claim that the bots in Musk's feed are under 5% of users, or that the number of bots overall are under 5% of users, they claim that the number of monetizable daily active users is under 5%. Given the definition of a "daily active user", reduce to "monetizable", and consider the number of users who never post anything but read tweets and click on ads and promoted tweets, and this isn't hard to believe.

On the other side we have Elon Musk, notorious liar, claiming that he doesn't want to buy Twitter because Twitter is lying about the number of bots, despite the fact that before tech stocks crashed, he said he wanted to buy Twitter to solve the bot problem. This isn't hard. He has buyer's remorse and the bots thing is the best excuse he has to get out of a contract he signed. It's a shitty excuse and no one other than Musk fanboys have any reason to believe him, and it's not even an excuse in court.

>Twitter's CEO gave a pretty good explanation of how they combat bots and how they calculate their mDAUs

Company that previously lied to investors about engagement and settled a massive billion-dollar lawsuit makes further unproven claims about engagement. You believe them why?

Should corporations which deliberately lie to investors be immediately trusted again, especially on the same topic they got caught lying about previously?

Your argument is an appeal to authority where no authority exists. They're liars. Not just liars in general, but liars about this exact topic. Do you trust BP's offshore drilling because the CEO now insists it's totally safe this time?

>Twitter doesn't claim that the bots in Musk's feed are under 5% of users

He never claimed this, this seems like a strawman. Did you read the complaint?

>this isn't hard to believe

Choosing to believe a company that has admitted to lying to investors is your prerogative, it doesn't make them trustworthy or correct -- and it absolutely doesn't make your argument based in any kind of reality (why should we take the liars at their word?). Why go to bat for a company with a billion in fines for misleading investors? Under what basis do you believe they've reformed and can be trusted?

I don't understand why you believe Elon can't be believed because of his history of lying while you ignore Twitter's sordid past of securities violations and lying to investors.

>Elon Musk, notorious liar

Why don't you label Twitter as notorious liars, given their billion in settlements for lying to investors?

> Choosing to believe a company that has admitted to lying to investors is your prerogative, it doesn't make them trustworthy or correct

More to the point, it's Musk's perogative, which he excercised when he signed a contract to buy the company based on their represenations while choosing not to do any due diligence to verify those representations.

I think Twitter is probably more believable here than you give them credit for, but Musk trusted them 100% for some reason.

> Should corporations which deliberately lie to investors be immediately trusted again, especially on the same topic they got caught lying about previously?

For lies known previously to Musk's offer, he had every opportunity to decide whether to trust Twitter or not, and he chose to by waiving due diligence.

If there's an allegation of an additional lie that's material to the deal, Musk hasn't provided evidence of that here.

>If there's an allegation of an additional lie that's material to the deal, Musk hasn't provided evidence of that here.

Did you read the filing? He provided evidence of them violating their obligations under the agreement (refusing to provide adequate access to data to independently verify claims made about user engagement). Twitter agreed to these terms. Read the original agreement to see for yourself.

>he had every opportunity to decide whether to trust Twitter or not

How does that mean fraud is okay? If Twitter lied again, it would be a clear contract violation. You can't just lie about critical company metrics to acquirers, due diligence or not. It's fraud AND a contract violation.

Given we're talking about a disreputable company with a history of lying, I'm not inclined to believe them and I don't know why you immediately believe their claims. Perhaps you can enlighten me as to why you think they deserve trust in this matter.

No. You are claiming that the numbers that Twitter has been putting in their official government stock filings have been false for years.

Thats ridiculous.

Twitter admitted to lying about user engagement in 2015 and paid a hefty price for it. [1]

Your argument is absolutely ridiculous. They've done it before, and settled.

Seems you have absolutely no idea who you're defending, which is a company that has routinely misled investors on user engagement and paid settlements for that very fact.

"The company with a history of lying to investors about user engagement would never lie about user engagement!"

[1] https://www.wsj.com/articles/twitter-to-pay-809-5-million-to...

Be that as it may, it’s not relevant to Musk getting out of his merger agreement now, which is unconditional except for 1) material adverse effect (which is a way higher bar than the well known bot issue) and 2) Twitter fulfilling the covenants in the agreement, such as continuing to run their business and providing requested information within reason. Since there is no way he is getting out under 1, MAE, he is trying 2.

You claim that lying about user engagement could never qualify as a "material adverse effect". On what basis do you make this claim?

As a thought experiment, if 50% of Twitter's claimed MAUs were bots, it would absolutely be material.

Given Twitter has a history of lying about this exact metric, under what basis do you believe that the bot issue isn't material? Blind trust in the same company that lied about it before?

I'm trying to understand why people trust the company that was caught lying to investors about the very subject they were lying about. Where do you get this trust?

For it to be relevant, the "material adverse effect" needs to have been caused by an action by the company subsequent to the deal being signed. Like, for example, the corporate treasurer suddenly going to Vegas and losing the treasury on blackjack.

Twitter may well have been grossly lying all these years, but the time to figure that out is before you sign the deal. That's kinda the point of doing due diligence.

The merger agreement requires Twitter to provide adequate access to data requested, if they haven't done this then the merger agreement has been violated even without a MAC violation.

Specifically, the merger agreement requires "all information concerning the business ... of the Company ... for any reasonable business purpose related to the consummation of the transactions".

Seems like an arbitrary API rate limit could easily violate this clause. How are you providing "all information [...] requested" if you drip feed it?

The fact they'd even play cloak-and-dagger with this information suggests there's fraud again. Companies with nothing to hide don't mislead acquirers.

You're using lots of words that imply malicious intent and bad faith, without providing anything to back that up.

Not to mention that your theory of Twitter behaving fraudulently in the context of this transaction makes no sense. They've got a commitment to purchase them at vastly more than their market value, so they're highly motivated to see the deal close. What's the incentive for acting in bad faith?

I mean, I'm anti-musk, but I certainly would believe his claim they've been lying about the bit population. Both Twitter and Facebook have lied about this in the past, so the only part of musk's position I find believable is that Twitter underreported bot users. That being said, he waived his right to due-diligence, so lol. Truly a situation where both sides are dislikable.

But there is lying as in “not telling the truth in a technically correct way”* and there is lying as in “committing a fraud”.

Musk would need to show the latter, not only the former. And that carries rather stiff penalties. As opposed to reading the rules very precisely and only effectively lying. Which is what lawyers are for

* always remember that Bull Clinton technically didn’t lie. He in fact asked his lawyers before that hearing and was told that “no getting a BJ, according to the law, does not constitute a sexual relationship”. In didn’t end up mattering because him staying president is a _political_ decision. Unfortunately for Musk, public opinion does not matter here

So what damage has been done to Elon by him not buying Twitter?

Now if Elon wins might be able to claim costs, but they would be minimal by comparison to the original $44B deal.

You're basing this on what exactly?

Twitter has previously lied to investors about user engagement and paid close to a billion in settlements for it. [1]

Seems to me that the company with a history of lying about engagement shouldn't immediately be trusted about engagement figures. Would you disagree?

[1] https://www.wsj.com/articles/twitter-to-pay-809-5-million-to...

You should have sent that to Musk back when he was talking about buying Twitter, I bet it would have helped his decision making process.

No I wouldn't agree. Most of the time if you do something dumb at a company you make strong rules to make sure it doesn't happen again.

I guess that's why Boeing's MAX aircraft has had numerous safety issues after the two fatal incidents.

Tell me, do you trust BP's offshore drilling operations today?

In any case, I addressed your question. Twitter are proven liars on this exact metric.

> so the best negotiating tactic he has is being a disruptive asshole so TWTR

Been successful at that.

And so far this behaviour earned him a law suite.

> Elon has a terrible case here, so the best negotiating tactic he has is being a disruptive asshole so TWTR just wants it done with (this is playing to his strengths).

Twitter isn't trying to stop him, probably because they don't use their product and may have forgotten they can just ban him.

Banning him at this stage would almost certainly expose Twitter to massive liability, especially as they have shown they will ignore rules for public figures. Twitter could only get away with banning Elon if he egregiously violated their policies, and Elon is too good of a troll to do anything that severe.

That doesn’t follow. The exceptionality of Elon is obvious to everyone. He’s the richest man on earth (by some measures), not an Everyman voicing a contrarian opinion. You couldn’t convince anyone you honestly thought “if they banned him, they could ban me” After all your latte art tweets aren’t significantly, materially damaging Twitter’s financial outlook

I'm saying that the formerly most famous tweeter (trump) fluted rules that would have gotten my account banned. Twitter didn't ban trump until after Jan 6th; so Twitter doesn't have any way to legally justify banning Elon unless he does something equally egregious. That's why Elon didn't get banned for the pedo claims or the multiple SEC violations. He is such a notable figure that Twitter can't ban him (without violating the terms of the acquisition) without stupendously egregious evidence that Elon violated their terms.

If Twitter banned Elon's account for a minor TOC violation now, they would likely expose themselves to legal retaliation. Sucks, but it seems we both agree that there are separate rules for the ultra-wealthy.

Edit: I can't swing any stocks with my tweets; whereas Musk can. That is the difference, is who has the platform.

If he's calling off the deal (which isn't a thing but they can pretend he is), it doesn't seem like a violation if you agree it's off. He might then get bored and decide to make it on again.

They had good reasons for not banning Trump until then, namely that he literally would've gotten their employees killed.

which could easily rebound a bit by EOY.

By EOY we could be in recession.

Which actually makes Elon's position worse, since theoretically that reduces Twitter's stock price and increases the spread between the fixed offer and the current valuation. Plus, his financing tanks since it is predicated on Tespa's stock value.

We are very likely in a recession right now. Q1 real GDP growth was negative. Q2 advance estimate comes out in 3 weeks.

I'm curious what would happen if Twitter stock price goes above Musk's offer price of $54.20 during this legal battle.

For that to happen, the market would have to (1) believe there is a very very high probability that the deal won't happen, and (2) believe Twitter is suddenly going to grow significantly.

Neither of these seem very likely, especially in combination.

There's also a third irrational option, with another gamestop style buying spree lifting the share price up.

Are lawsuits limited by max(previous settlements)?

texaco v pennzoil.

Big Tobacco settlement - $206 billion

Deepwater settlement - $20 billion

VW Emissions settlement - $14.7 billion

In an important sense, this particular conflict is (as yet) dramatically better than these -- it hasn't involved thousands of people bickering for many years.

So my hunch that this could lead to him going broke isn't completely off base?

I figure he ends up having to pay $10E+10, and everyone knows it, so he gets short-squeezed in Tesla stock, then margin called on any loans against his stock... then POOF

$10 bn out of $200+ bn won't make him go broke though. Don't see the logic in that, Mike.

It could if your $200 billion valuation is based on the stock of over-valued companies which you used to over-leverage-borrow, and you need every free penny to continue paying back debt and keep that stock price high.

He doesn't have $200,000,000,000 in cash.. he has stock, the value of which is exclusively depended on buyers exchanging their $ for it. There's nothing stopping any publicly traded stock from collapsing in value to the physical assets of the company minus any debts or liabilities.

According to this thing I found on the internet[1], if I read it correctly, Tesla is worth $31B if it were stripped and sold.

Most of Elon's wealth is Tesla stock... far more than the actual value of the company, by a factor of more than 5. If he has any debts against his stock, those could be his downfall.

[1] - https://www.marketwatch.com/investing/stock/tsla/financials/...

Elon owns 16% of Tesla and Tesla stock is the vast majority of his wealth. If the market cap of Tesla were to crash below $150 billion it would be in the territory where his penalty to Twitter could be multiple billions more than the value of his Tesla stock.

I personally don’t think Tesla is worth even $100 billion. However, the markets disagree, and it is difficult to imagine a scenario where Tesla loses 80% of its value.

…but it’s not totally inconceivable.

> he gets short-squeezed in Tesla stock

What?

Yeah that makes no sense. He has a lot of stock and wants to sell some.

A short squeeze means you have an obligation to buy shares and not enough are available, that drives the price up like crazy.

I used the wrong words, obviously.

If Tesla stock drops and his loans against Tesla stock go negative, he'll be forced to liquidate more shares to make up the difference to keep the loan afloat... this would then lower the value of the stocks even more, and the positive feedback loop could let all of the air out of his imagined wealth.

In other words - He has effectively sold shares at a price by borrowing against them... if the price falls, he'll have to do something to make up the difference... which is about the same thing as a short-squeeze for him.

It's the same mechanism as a short squeeze, just with the roles of stock and cash swapped. There is likely a specific word for that, but the comparison works.

Squeezed short sellers have an obligation to get a specific stock, but only have cash. There are not enough market participants willing to sell the stock, so the price rises astronomically to their disadvantage.

Elon has an obligation to get cash, but only has $TSLA stock. There are not enough market participants willing to buy the stock, so the price drops enormously to his disadvantage.

You can't short squeeze a seller. Sorry you just can't.

> the difference between the fair current market value (~20B$?) and the purchase price (~44B$)

Why would the current market price have anything to do here? Twitter want him to be forced to buy for $44B, not a penny less.

The original purchase price minus the current market value is how much they lose if he backs out of the deal, so that's the ballpark of what they would want to get paid to let him not buy Twitter.

That’s not true, they lose more. If it is acquired they sell all their shares instantly without any negative effect on the price of the shares. If they did that not as part of an acquisition, the share price would tank.

~10-15B$ is not inbetween the 2 numbers you posited it would be between though.

That's not what difference means.

wow. total brain fart caused me to completely skip the word difference

Eh, math when written out instead of expressed numerically is sometimes hard. Props for admitting the brain fart though, as the sister comments show being wrong on the internet isn't always easy.

44 - 20 = 22 != 10~15

44 - 20 = 24 != 22

Two plus two is four minus one that's three quick maths

Username checks out, to an extent.

What they said was:

> in the neighborhood of the difference between the fair current market value (~20B$?) and the purchase price (~44B$).

The difference is 24B$ which is implied to be the upper bound. 10-15 is in the range 0..24.

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