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Comment by partloyaldemon | Hacker News Reader

Chancery courts will compel performance of this transaction absent a showing of an material adverse advent. Very, very high bar. The buyer is a highly sophisticated investor and the grounds that he is alleging form the basis of the breach of contract were and are public information that has not materially changed nor been alleged to have materially changed since the signing of the merger agreement. Moreover, and most critically, it is not being alleged that spam accounts have any substantial impact on the earnings of Twitter. Thus, the courts will obligate Musk to buy the business as he agreed to in April.

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I actually have experience with this type of stuff, some business tried to acquire mine and kept postponing, and ended up with some excuse that there wasn’t enough technical design documentation, which would be a real-breaker. It wasn’t super big money, but also not small (high 6-figures).

I ended up suing them, won on all counts, and the deal had to go through.

Unfortunately, this company simply refused to do that even after the judge ruled against them, and I had to renegotiate the terms set by the judge.

That was one hell of a ride.

Point being, if Musk really doesn’t want it, even if Twitter wins a lawsuit, Musk will probably find another way to postpone or renegotiate or whatever. In the meantime, Twitter is not in a good shape, and this whole thing is probably hurting them so much more than that they could possibly benefit from.

What happened when they ignore dthe order from the judge? Nothing?

If he willfully disobeyed, there will be sequestration order against his assets.

The court will appoint someone else to go trough his assets and find a way to pay. Selling Tesla stocks for example.

How could they refuse after being compelled by a court ruling? Did they appeal / sue you back? Can't see how they could simply say... "no".

The judge ruled that the payment had to be made immediately; they could sue back, but they would have to pay first. In their words, it was a “BS ruling”, and they simply didn’t pay.

I’ll tell you that I didn’t know you could just say “no”, but they did. My lawyers were at the point that they would send a (legally backed) letter to all their customers, that their payments should be redirected to some court. It would have caused a massive hellfire, though.

I had the choice of going through with all this, but the outcome would still be uncertain, legal fees would increase, and take a long time regardless. It was a fully bootstrapped business, I was relatively young and in debt, and I decided to renegotiate.

In the end I got the money I needed to pay off my debts, legal fees + then some, a huge learning experience, and took a 1 year sabbatical. I just wanted this whole thing to be over.

> I had the choice of going through with all this, but the outcome would still be uncertain, legal fees would increase, and take a long time regardless.

So it’s just you deciding not to go with this… for some reason.

I’m pretty sure if you enforced the ruling, you’d have gotten a quick response from them. It might seem like a dick move but they moved first.

At $44bn, I highly doubt the dudes of Twitter will take the same stance you took.

> I’m pretty sure if you enforced the ruling, you’d have gotten a quick response from them.

don't tell someone that you know more about a situation that they were in and you were not. A) it's freaking rude as hell, and B) you absolutely DO NOT have more awareness about this situation than the person who lived it.

I don't get this mentality. I don't get why people think living through an experience makes them such an expert that any outside opinion is immediately offensive.

An outsider can always offer a new perspective and they could be more knowledgeable than the person who went through the experience.

It wasn’t my intention to claim to be an expert on the situation, as much as it was mostly to share a story and point out that there’s a large grey area here.

The parent definitely was factual and correct, but the tone made it sound a bit as if they thought my reasons for doing so were incorrect. That would be a bit of a stretch, and I think that’s what was bothering @naikrovek

Didn't mean to imply that was how you felt. My response was aimed at the mentality @naikrovek was stating, which is definitely a wider held belief in some communities.

It’s not offensive. It just makes the replier looks like an idiot.

Who do you think had the best perspective on the situation? The person who went through the litigation, had lawyers, knew all the details of the case and made the decision of the poster sending a canned five lines reply based on a paragraph?

It does take much awareness to realise that sending an abrasive reply when you are in no position to do so might be ill received by the community (well at least the quickly diminishing part who wants to have an interesting discussion).

It's a Chesterton's Fence situation.

An outsider is just as likely to be an arrogant fool, and an arrogant fool is more likely to find skepticism offensive than a normal person. There are plenty of people, even on Hacker News, who assume that they are by default more knowledgeable than anybody else, and therefore are obliged to look at any given situation, opine, and set the record straight. Other people don't matter, and certainly their 'experiences' won't count. So, it's not surprising or offensive to run into the 'water squirt bottle of correction', where kitty gets unexpectedly hit with the message 'opining on experience you've never experienced disqualifies you as a first class advice giver'.

Chesterton's Fence is of course the idea that, if you encounter a fence and you don't know what it's for, you don't take it down until you do know what the fence was for. People tend to get worked up about the things they see that, to them, seem to be there for no reason, and advocate all the more vigorously for removing such things when to them, the existence of the thing is obvious nonsense with no possible justification… they would rather think that a thing was done by a total fool who's so inferior to them as to be hopelessly incapable, than consider the idea that their superiority might be questionable.

Well this isn't exactly a currently-standing fence, so the metaphor falls down.

It's more like someone coming upon their neighbor complaining about a mutual neighbor and their fence and offering them advice for the next confrontation with the neighbor.

It's a really simple allegory that warns about the dangers of approaching a situation from a position of ignorance.

Yes and misusing simple allegories and therefore misunderstanding the situation is very common.

It's nice to learn there is a name for something that took me a few years to discover. If something doesn't make sense to me, it's probably because I'm not realising the whole scenario.

I've learnt not to critique other peoples designs without a full understanding. The designer probably would have changed a few things if they had a second attempt. Unknown and usually silly requirements can play a big part in design that you as an outsider are unaware of. I've learnt to assume competence rather than incompetence. At the time, there was likely a very good reason for such a decision.

And sometimes the requirements that a thing was built on aren’t meant to make the best possible product, e.g. budget, repairability / maintainability, compromise due to integration with other systems, etc etc

In the same vein as “never attribute to malice that which is adequately explained by stupidity”, “never attribute to engineering that which is adequately explained by finance” :)

Great comment, feel like this puts into words what I see in interactions on here sometimes that puts me off. I might say that especially on Hacker News there are people who assume they're by default more knowledgeable than others.

> An outsider ... could be more knowledgeable than the person who went through the experience

If the outsider is making general claims about similar sorts of situations, then sure. If they're predicting the behavior of someone unknown to them, but well known to the OP, then not so much.

Thank you for saying this. While I do agree with the parent that in the the end it was my decision to go this route, the situation was much more complicated, and I absolutely wouldn’t get a quick response from them.

Having said that, I wasn’t insulted by the parent, and they made a good point: my decision was based on pragmatism, and in the case of Twitter, this was much less likely to be the case. Since I decided to share my story in light of this whole Twitter debacle, the parent was right to point out that the comparison isn’t entirely correct, even more so when it’s about dozens of billions. The rules of the games are different there.

Commercial litigation is entirely about pragmatism.

If twitter won and was in the position to compel performance, is that even in the best interest of the company? To force it upon an unwilling owner would be the best way to destroy it in very short order as they desperately attempt to recoup their costs.

Far more sensible, with an enforceable order in hand, to come up with a negotiated settlement. Far easier, as well, with a nuclear option.

It doesn't need to be in the best interests of the company, it needs to be in n the best interests of the shareholders. If the company dies once Elon owns it, it sucks for the employees and Elon, but not the all important shareholders.

Indeed, if the point of the sale was to put Twitter in hands capable of steering the ship, they wouldn’t have sold to Musk in the first place.

In this point, it is the interest of the CEO, board and shareholders to collect a fat check and let Mr Musk burn down with Twitter. It’s Musk’s problem what to do with an unwilling owner issues.

What fat check is the CEO and board getting? They own virtually no shares, so it wouldn't be from Musk. And if a reluctant owner takes charge, they aren't writing a fat check or shaking on a golden parachute. The lot of them can only expect to be immediately terminated, but knowing Musk, he would likely take legal action against them and do his best to make them unhirable... so they would likely bail during legal proceedings.

So doctors know less about a situation than the patient experiencing the pain?

A good coach has zero impact on their players that actually experience the game?

A doctor certainly knows less about what the patient is feeling than the patient themselves. It's a known phenomenon with women's health, where we have medical professionals literally gaslighting us about our own physical and mental health.

I have a friend who got screwed by a major (top 5) US bank, won the court case against them, and they then refused to pay the settlement.

He went through the paperwork, and 6 months later they wrote him a cashiers check right then and there when he showed up with the Sheriff to take possession of one of their prized historic artifacts from the lobby of their corporate headquarters during business hours.

Not very many people are able and willing to deal with the shittiness of all the paperwork required, and a lot of bad actors count on that.

Should have taken the artifact. Magic items are always better

wtf. which jurisdiction is this? so strange you can't take the final ruling and go to a collections agency and get your money :o

You can. But the story would imply that all that money is in receivables; it's hard to seize a big pile of debt, I assume even in Europe.

not really as far as I know.

either the company pays up (in whole or in installments, etc) or the enter into bankruptcy proceedings and the courts appoint someone. if the company is profitable, then as above it'll eventually pay up, if not, then it'll be sold off and the liabilities will be covered up to by the income of the sale.

You can. In my very very limited experience you can sell it to collections for something like 80% of the value in a case where they have a perfected security interest. They will send a UCC letter to payors, who are legally obligated (from what my attorney tells me) to pay the creditor, absent some proof that they don't need to.

Do some thought experiments in your head, and you can see how quickly things break down.

Like: The courts say pay, and the company says no. So you...

- ...send police (not really the jurisdiction of the police, but let’s pretend they go). The police show up and say “Give us the money you owe” and the business says no. Now what? They can’t go on to private property without permission or warrant. Dead end.

- ... become your own collections company. You call them as much as you are legally allowed, and ask them for the money. Each time they say no. You call their family (you might not be allowed to do this) and they say “not my problem” so they are dead ends. You call their vendors and clients but all you are doing is informing them that company X owes you money. They don’t have any obligation to give you that money.

- ... sell the debt to a collections company. That company gives you pennies on the dollar (20% if you’re lucky).

- ... work through the courts to garnish wages. You have no idea what this company pays their staff for wages, nor who to target (the exec who said no?), but you push forward anyway and end up getting that garnishment. You now get 30% of everything that person makes. Let’s call that 30k/yr at the time of the garnishment. Then, that person quits or takes a “lower-paying job” and you’re down to 10k/yr. It will take decades to get what’s owed to you and in the mean time this person is actively battling you in court because they hate losing 30% of what they make every month.

- ... pursue action that gives you a percentage of the company’s net revenue. If you get it, you can only celebrate for what feels like a moment because they could have a “sudden increase in expenses” or choose to close the business and start a new one with a different name. You can try to get the agreement shifted to that new company, but that’s a whole new challenge and the whole time the founders are saying “No.” “Not our responsibility.” and so on.

It’s really very hard to get cash in hand from anyone, whether there is a court ruling or not.

it's not that hard here (Hungary)

yes using a collections company is the fastest way, but here the cost is less than 10%.

and it's not that hard in case of mortgage defaults in the US either (foreclosure is completely routine). oh and there was a story of a dude who won some claims against some bank, the branch was either clueless or forgot to pay, so eventually the dude went to the branch office and packed up some of their furniture. (which is of course less routine)

the way it works here is that if the company doesn't pay upon the court order they automatically enter into bankruptcy and the court appoints someone to manage the company during. so they can't just suddenly "increase expenses"

Seems like a really complex system to get your money. Here in Finland you would just start bankruptcy procedures by filing a claim in the court and with the court order saying they owe you it would go through in a day or two giving the other party 2 weeks time to pay or the court would take over all their assets and get you your money (and sell those assets if they don’t have it in cash)

A single verified unpaid bill is grounds for starting the bankruptcy procedure here so it is actually good tool to force big companies to pay. Though you can say goodbye to any future business relations with them if you do that.

Japan is similar. I keep marveling at the stories about the US system and wonder how it is supposed to be considered friendly for businesses...

Does the example not make it obvious? Imagine your business doesn’t want to pay a bill from some douchebag business you hate.

I think the parent means that a system in which anyone can delay the payment of otherwise legitimate financial claims through an extremely protracted legal process is generally not very business-friendly. Of course, it is friendly to businesses that do not want to pay their liabilities, but on the cost of all the others. What good is a legal system if a company cannot enforce its rights in practice?

The same way any human system works: people mostly want to do the right thing, so they do.

It’s not a case of a simple disagreement though. In this situation there’s a court order requiring you to pay the bill. Not wanting to doesn’t cut it.

You’d be amazed how long someone can go in open defiance of a court order before something concrete actually happens.

It usually requires going back to court for the concrete thing to actually happen too; and it’s rarely all that catastrophic.

Judges are surprisingly willing to give folks more rope to hang themselves with later.

It's the same in the UK:

https://www.gov.uk/wind-up-a-company-that-owes-you-money

"To wind up a company you must:

* be owed £750 or more * be able to prove that the company cannot pay you "

That's it.

How do you prove they cannot pay you - show an unpaid invoice?

I only ever threatened it once so didn't go to the expense of filing.

In practice, yes an unpaid invoice, plus proof of delivery /service. Alternatively, a judgment from a court ordering them to pay.

The trouble is the actual collection, which as far as I know is still left as an exercise for the person owed.

Nope, when a company is struck off (directors given 2 months notice etc) its assets are frozen and passed to The Crown, who appoints an Official Receiver. They liquidate the assets, pay any creditors (pay themselves) and keep anything remaining.

So it's an absolutely nuclear debt collection option, and not fast. But the threat is real if the debtor can't argue the debt away.

In Sweden you can actually do that before you’ve won the court case. If a lower court rules that you have a legal right to payment, then you can collect on that even if the other party appeals to a higher court. (They can then of course do the same to you if they win the appeal.)

But this is taking it a bit far IMHO. It’s confusing to me at least that a court order is not final (“has not yet won legal power” as we say in Sweden), but can still be used to force payment through the authorities (Kronofogdemyndigheten).

Getting though it however, and actually getting paid is a long and arduous process. That’s what the poster was up against.

It’s not THAT uncommon for some folks to just say ‘oh yeah, make me’, and while there are (usually) methods of doing it without their co-operation, it’s never easy.

If you are the only debtor and they have the money (no need to sell anything) then it is actually really fast. The court just takes over the bank accounts and sends you the money.

The real slowness of the process kicks in when there are multiple parties claiming their money and there isn’t enough assets to pay everyone.

By ‘really fast’, I’d wager 6 months to a year, no?

You’d have to show all that was the case for instance, which if they ignored you and generally were unco-operative would take awhile.

Took me 17 days last time. A couple days for the claim to go trough the court and 14 days of time for them to pay. After that as they did not during the next bank day the court took control of their bank account and wired me the money. This was for unpaid wages but the same applies to any unpaid bill.

As I said it really only gets slow if the party does not have the money (as in they are bankrupt for real instead of just refusing to pay) and there are multiple parties claiming it. At that point it slows down to figure out how to split the assets.

There really isn’t any way to avoid this outside shutting down the company and moving the money out of the accounts but that will just dig the hole deeper as now they are not only contempt of court (not paying as ordered to when they are capable of) but they are also actively stealing/hiding someone else’s money.

Which jurisdiction?

Unpaid wages are usually treated very different from most claims, at least here, and do get handled in a very expeditious manner (labor commissioner in some places with literally raid workplaces sometimes).

Secured debt (pay me or I get this property - in the contract), can often get similar expedited treatment here in CA.

unpaid improvements (mechanics liens) on real or personal can get handled in a month or two here, but actually getting liquidated damages out of it can take a long time.

Other claims (general vendor bills, liquidated settlements), often meh.

I'm betting that for the money Musk is in for they will go with that option though, and considering all the side effects that would probably happen if Musk just said 'No' - he would have to be a level of stubborn that borders on mental instability.

So, basically, if you rich enough in the US, you can simply ignore the courts?

Yes and it doesn’t have to do with rich/poor. Until someone either takes an action on your behalf or physically forces you to take an action you can ignore their requests all you want.

At least for a long time, yes. The example that comes to mind...

https://www.washingtonpost.com/technology/2020/01/08/califor...

Stories like this remind me why I hate seeing advice on forums that often boil down to…”and if that doesn’t work, just sue them.“ It’s a massive, risky, expensive, physically and emotionally draining experience.

When you have a judgement you can send it to collections, but often people just don't pay these things. It's really hard to collect for even small things like evictions.

> send it to collections

When my now-adult son was in high school, he had a summer job working as a moving man for a friend's dad's company. The company had a contract with the local constable's office. One of my son's and his friend's assignments was to drive a truck around to the offices of a very-big shopping mall and to meet a constable to collect a seven-figure court judgment that hadn't been paid. The constable, my son, and his friend walked into the management office; the constable presented the writ of execution of the judgment, and my son and his friend started unplugging and loading up office equipment and furniture to be hauled off and sold at auction. The manager said "Wait, wait"; a hour later, a cashier's check arrived for the amount of the judgment.

Video of a similar story:

https://youtu.be/3ctLEGrOmf4

> The constable, my son, and his friend walked into the management office; the constable presented the writ of execution of the judgment, and my son and his friend started unplugging and loading up office equipment and furniture to be hauled off and sold at auction.

yeah, that’s like totally reasonable. I’ve done similar back in the ‘80s, using a similar process seized bank accounts when the former employer ignored an order to pay a judgement over unpaid expenses. Notably they didn’t bother to appear in court in the first place; they never responded to service even though I paid extra to have the Sheriff’s Deputy serve it. Then they ignored my calls and letters for several weeks. I knew all the bank account numbers already, so: back to the judge for an order to seize the accounts. Showed up at the bank an hour later with the deputy in tow and walked out with a bank check for roughly $45k 30 minutes later.

Nowadays a bank makes you wait some days for a payout but they will freeze the funds immediately.

These days I prefer lawyering up, but in the late ‘70s I called on a supplier to deliver promised equipment that was being delayed because well, I was a teen-ager and even though I had paid they felt like I wasn’t a serious customer. So I paid a local motorcycle club $500 to escort me to the meeting, as well as sit there in the parking lot revving engines and scratching off whilst I met with the vendor. The MC got a hefty tip because: members helped load the product, and the MC president encouraged a 50% refund made out to me personally to ensure I would never have to be a customer again...

You can also get an order to liquidate and literally start taking assets like real estate, bank accounts, etc.

Not to mention, could the officers of the company be held in contempt of court?

It is possible, but typically the remedy is a writ of garnishment.

If a party is intent on being a bad actor it is extremely difficult to enforce judgments where the sum is too small to warrant extraordinary effort.

Difference being, Twitter has deep pockets and are highly motivated to see this through.

Not as deep as Elon Musk.

When it comes to court battles, relative depth matters.

Is it clear that Elon is more liquid than Twitter? Twitter has several billion in cash. Musk is reported to have only 3b cash. Tesla and SpaceX may need his capital to survive the downturn. They both have an arsenal of options to raise further cash.

I realise Elon is a bigger fish but he is a highly leveraged and constrained one…if anyone has more insight into this dynamic I’d interested to hear it

Twitter cash on hand for the quarter ending March 31, 2022 was $6B

https://www.macrotrends.net/stocks/charts/TWTR/twitter/cash-...

How is twitter getting so much cash ? Are the ads on twitter earning them that much ?? Or is it cash they got from raising funds ?

You can see Elon sold something like $8-$12 billion in TSLA stock in the past few months. Assuming it didn't get spent on SpaceX or somewhere else (it was supposed to be used for the Twitter buyout) he has more cash than Twitter. But that doesn't really matter, at a certain point the amount they spend in legal services will reach such diminishing returns that it's not worth it.

Only to certain point. At that point you can't spend more than other party. There is only so much legal work that can be done for one case.

Not that bar isn't very high, we are possibly talking about millions or tens of millions in billings, but either side have that and it will make sense for both to spend it in every case.

It really doesn't here IMO. They can both afford top-tier legal teams.

Delaware courts are known for dealing with these sorts of cases rapidly - there isn't likely to be any opportunity for dragging it out for years.

Re twitter: What a waste of life time and resources that could be otherwise have been used. All for what? For the ego of a madman?

Why would you force someone to buy something they don't want, whatever the reason is ? If they decided not to proceed to the deal it means it was a bad deal from their perspective or that it would put them in a worse situation. Essentially you are taking advantage of them by forcing them. It's like if you sell a very expensive "brown ice cream", the buyer tells you he wants to buy it, and then when the buyer has it in hands they realize it's not chocolate and you say: "but it's brown ice cream, you are forced to buy it now"

To get their money, presumably. If Twitter stocks fall due to this situation then all the more interest in getting the previously set deal to go through.

Well, this probably doesn't come up very often in general, but one reason for Twitter to want to proceed might be if someone had signed a legally binding agreement to pay 15 billion dollars more than the market rate.

> Why would you force someone to buy something they don't want, whatever the reason is ?

Because they agreed to buy it? And because you stand to make a lot of money. Doesn't seem that complicated to me.

Yep. It's basically "why wouldn't you accept half your wages if the company really didn't want to pay you the full amount?" or "if you lend somebody something and they decide to keep it, why would you try to get it back?"

"It turns out I don't want to do that" isn't something that should be supported in regards to written and signed contracts. Selling a company is a large enough thing that there's downstream effects when the contract is signed and both parties are committed, and there's a real cost to the counterparty saying "on second thought, nah".

From the seller’s perspective? Because they own a thing which is worth less to them than the buyer promised for it. Therefore they can profit greatly from the deal.

This is not the story of some happless kid swindled by a brown ice cream vendor. This is a sophisticated business person who has, prior to signing a legally enforceable contract to buy the brown icecream as-is, talked publicly about how the ice cream is just brown and not chocolate.

Why did the buyer made that contract to be written and then signed it? The potential buyer of the brown ice cream was not taken seriously initially. Everyone, including the seller, assumed that he is going to flake out and not go through with the transaction. The buyer has seen that he is not taken seriously, but he really really wanted to own the brown ice cream at that time. So the two parties willingly went into a written agreement that the buyer is going to pay a lot of money for the brown ice cream. Since the seller had concerns about the flakyness of the buyer, they both instructed their lawyers to write the contract as ironclad as possible. And what gives teeth to contracts like that, is that they can be enforced through the court system.

If he didn’t want to buy it, he shouldn’t have signed a contract saying they are going to buy it with a huge amount of fanfare, several lawyers, and initially against the desire of the company. He knew, well in advance, what he was buying, and he explicitly waived the right to due diligence.

The due diligence was done already, and this being a public company adds a layer of regulation on top

It being a bad deal for them likely makes it a very good deal for you.

Also, letting them renege on the deal they agreed to would likely put you in a worse situation than had they not offered the (bad, for them) deal in the first place, making it harder to feel bad for them.

Ultimately, if a business made a binding agreement, letting them out of it to be nice is nice, but neither required nor financially sensible.

Sounds like a very unpleasant experience, sorry to hear. But I'm not sure it's a good precedent for this case, for two reasons:

a) You were happy to settle, which sounds understandable. But when the stakes are $44bn and most actors on Twitter's side are but agents for Twitter shareholders, their chief concern will be not breaking their fiduciary duties if they accept anything less than the maximum amount they could get. It's a bit hard to imagine how the legal bills for seeing this through could stack up to even .1% of the purchase price ($440m), and that's nowhere close to the discount that Musk will be looking for (with good reason imho, btw).

b) In your case the other party might have gotten away with dodging a court order to pay (or at least made it appear like that). That's pretty much unfathomable if you are literally the richest man on earth and live in the US.

> chief concern will be not breaking their fiduciary duties

Let’s not forget the all the blather from Twitter board and leadership how their fiduciary duty was to not sell to Musk at this price.

Cramer even claimed the board would be personally liable for accepting the deal.

https://www.cnbc.com/2022/04/14/cramer-twitters-board-has-no...

Cramer's advice is a decent guide if you always take the opposite opinion.

Yes, following that guy it is understandable why he would never be a hedge fund manager for a long time. When it comes to investing he is stupid as a brick.

Hedge Fund Managers are also not the brightest flowers:

"The SP 500 Index Out-performed Hedge Funds over the Last 10 Years. And It Wasn’t Even Close": https://www.aei.org/carpe-diem/the-sp-500-index-out-performe...

"How Smart Are the Smart Guys? A Unique View from Hedge Fund Stock Holdings" [PDF]: https://jgriffin.info/wp-content/uploads/2016/10/smart.pdf

"...Hedge funds exhibit no ability to time sectors or pick better stock styles. Surprisingly, we find only weak evidence of differential ability between hedge funds. Overall, our study raises serious questions about the perceived superior skill of hedge fund managers..."

But that’s not the benefit of putting your money in a hedge fund at all, the benefit is hedging against losses, so that you don’t have to worry about losing money when everyone else is.

It's literally called a hedge fund, not sure why people would assume they are after the highest & riskiest returns.

Historically, hedging was the reason when the first such funds launched that allowed them to use a specific regulatory loophole. The name has stuck around much more so than the strategy, though, nowadays there are entire classes of hedge funds that don't necessarily work like that anymore (eg long-only, special situations arbitrage, global macro,...). Nowadays it pretty much just means a specific legal structure, if it means anything at all, since it's become such a widely used term.

The hedge funds themselves get rich through fees. The investors get robbed. Not sure why anyone still believes in hedge funds.

he was a really good hedge fund manager though

The Anti Cramer portfolio is not a sufficient contrarian approach, because the Cramer portfolio also underperforms similar to a random walk. Put another way, the opposite of a random walk is another random walk.

Might be able to make an argument based on Regression Towards the Mean and the fact Cramer picks are "extremes".

> Let’s not forget the all the blather from Twitter board and leadership how their fiduciary duty was to not sell to Musk at this price.

Is there a source for this? I certainly didn't see it. They considered rejecting the offer, and quickly passed a poison pill provision, but that was about preventing buying the company on the open market instead of making a deal like this. The offer was initially only a very short note, and Twitter decided to sell within 3 days of financing being lined up.

https://www.sec.gov/Archives/edgar/data/0001418091/000119312...

> It's a bit hard to imagine how the legal bills for seeing this through could stack up to even .1% of the purchase price ($440m)

That is 1%, not .1%

You're right, my bad.

> dodging a court order to pay

I'm pretty surprised musk seems to have put himself personally on the line, rather than putting 'musk acquisition project llc' as the party making the offer.

If it was the latter, then everything could be arranged so there was no money in that company to pay for any lawsuits. As the worlds richest man, dividing up your liability like that into many LLC's would seem like a very important thing to do.

> As the worlds richest man, dividing up your liability like that into many LLC's would seem like a very important thing to do

Unfortunately for Musk, when an LLC is used as a proxy for the single member without real separation, the LL part stops working as anything but (on a matter this size) a small additional speedbump rather than a shield, at the same time, it's even nominal separation makes it harder to make deals than if your hoards of assets were behind them.

> In your case the other party might have gotten away with dodging a court order to pay (or at least made it appear like that). That's pretty much unfathomable if you are literally the richest man on earth and live in the US.

It is other way around. It is way easier for rich person to get away from dodging courts then poor one. Just the fact that rich person can pay fights and layers longer, and fact that rich has it easier to retaliate so everyone is more careful not to step on their toes or do mistake.

< Twitter is not in a good shape

It appears they will make around $6B in annual revenues, I think their financial performance is better than most social media platforms, save FB. In what way, Twitter is not in good shape?

The CEO has a massive parachute. Its in his best interest to just settle on a lower price rather than get tied up in courts for years with Musk. If the markets continue to decline, a lower offer is going to look more and more attractive to shareholders. Just my 2 cents.

A feature of modern finance is the blockbuster leveraged buyout signed right before the market crashes: RJR Nabisco in 1989, Hilton and Harrah's in 2006. Now Twitter, in 2022.

Porsche and VW in 2008 if memory serves well. Almost ruined Porsche. Or Schaeffler and Conti, which almost ruined Schaeffler, a private company at the time.

It's almost like these things happen pretty regularly, so it's easy to find examples that correlate...

There is a documented negative effect on returns with private equity deal size. Record-setting leverage really only happens after prolonged low volatility twinned to easy money.

The Porsche/VW thing was complicated by a short squeeze, not the financial crisis.

The short squeeze was an effect of two things (too lazy to look up the details now): Porsche having funding issues and tye complicated share structure of VW, the short squeeze affected the class B(?, those with limited voting power) of VW. Without the financial crisis, Porsche could have easily financed the take over.

It was incredibly risky so. And the attemot was partially driven by a feud between the Porsche and Piech branches of the Porsche family tree, with the latter "represebting" VW. All that does is show us that high stakes decisions should never be taken based on "personal" issues.

I like to post that picture of a python that tried to eat an alligator when Schaeffler's ill-timed purchase of Conti comes up. Always good for a laugh.

Schaeffler survived, but barely, and had Kurzarbeit not been a thing, it probably would have been a lot uglier. Kurzarbeit is a lot of why Germany came out of 2008/2009 in reasonably good shape. Better for pretty much everyone in an industry to be working 80% of the time in their current positions and getting 90% of their pay than for 20% of them to be out of work and struggling to make ends meet on unemployment - better for the workers, and better for their employers, who can turn around much more quickly when things get better.

This seems like a great example of selection bias if there are blockbuster acquisitions every year.

I don't think there was any implication that the big buyouts before a crash are unusual - calling them "a feature of modern finance" seemed to be implying that they're inevitable.

Acquisitions become crazier and crazier as the market gets hotter and hotter, with ever increasing purchase prices - someone inevitably gets left holding the bag when the market comes crashing back down to earth, and it's often the greedier players who take bigger risks.

The blockbuster acquisitions that happen in the middle of the bull market also often seem insane in the moment, but if the market continues on the up after the fact then they're remembered as sound business decisions rather than as a symptom of mania.

> if there are blockbuster acquisitions every year

There aren’t. They cluster to varying degrees depending on the thresholds one chooses. But the likelihoods are far from uniform.

I don't think Elon is trying to get out of it, he's got 2 goals:

1. Buy more time until stock market (i.e. Tesla shares) recover 2. Renegotiate the price

Either one will probably mean he goes through with the deal. If he is under litigation for a year so be it, once the stock market recovers he's sacrificing a lot less of tesla to buy it.

It's a big IF though. If the US recession gets really bad and the Fed stops interest rate hikes, the market could recover very quickly. But equally if Powell wants to go the Volcker route, Elon is fucked probably, the market won't recover for years.

And in the meantime Elon's reputation I think is taking a massive hit. And I think a lot of his new political allies on the free speech side will be extremely disappointed. He might end up with no friends on either side.

So he is taking a big risk here.

> buy more time until Tesla shares recover

The problem is that Tesla is massively over-inflated and Musk knows it and many people believe that was actually the reason for the whole twitter thing (Musk converting overinflated Tesla shares to fair-market value Twitter shares). With Tesla very likely losing the 'biggest EV maker' title to Volkswagen by the end of the year, it here has to be some sleight-of-musk for TSLA to recover.

> With Tesla very likely losing the 'biggest EV maker' title

Since you mention it...

https://uk.pcmag.com/cars-auto/141332/tesla-is-no-longer-the...

Yeah, but this is only half-true. BYD produces as much hybrids as full-EVs, so Tesla is still the biggest maker of full EVs.

What I was saying: If you extrapolate year-over-year sales of full EVs, Volkswagen will likely sell more full EVs than TSLA sometime this year.

Eh? VW is aiming for ~800k this year, whereas Tesla is going for roughly 2M? Am I misinterpreting?

@EricD: I took historic sales increase year-over-year and extrapolated from that, which led me to believe VW will narrowly pass TSLA by the end of the year.

You seem to have better or more recent information than me. If so, please share the source. Thanks.

Apple sells less smart phones than Samsung. Yet Apple is the most valuable company in the world and Samsung isn’t even in the top ten.

So while I think what your claim matters little as it relates to the value of the company I also think your assertion that this or that company will sell more EV’s than Tesla any time soon is more likely that not wrong.

Since it was shown in the last years that legacy car makers are perfectlh able to transition to EVs, regardless of market segment, I think we are approaching the point of realizing that both, EVs and ICEs and everything in between, are just cars. Meaning that purely EV makers should be compared to ICE makers. What that means for companies like Telsa is everyones guess, at the very least so it would just be fair to treat Tesla as a car maker and not some SV style tech company.

Except they are miles ahead in battery tech, autonomous driving, and supercharger rollout.

I wouldn’t write them off just yet, they’ve got a lot more innovation in their DNA than the old car makers

I don't write them off, by no means, even if I was sceptical a couple of years ago. Tesla will remain a car maker for sure.

Battery tech, so, is mostly Panasonic. And other are catching up. Esentially, there are ICE makers that don't have the best engines. And lately I sae mucj more, relative, innovation and transformation cing from the likes of VW than from Tesla.

They are starting to dry roll batteries, technology which no one has achieved before. And many other production innovations. And that was over a year ago.

They are most certainly miles ahead by now.

> autonomous driving

No they aren’t. Their sensor stack is handicapped and has literally murdered people. Sure they have “autonomous” cars in customer’s hands now, but that’s only because Musk is reckless, that doesn’t mean they are ahead. GM bought Cruise which I would say is definitely ahead of Tesla in their technology and ethics.

This is rubbish and proven wrong. Tesla claimed to be years ahead, European Regulators beg to differ

> Super charger rollout

US only, Europe those super chargers are available for everyone. In some asia countries they are behind https://paultan.org/2022/05/13/tesla-open-to-idea-of-establi...

> Battery tech

Yes, others are catching up or are competitive, differences are much smaller than expected improvement over next 10 years.

https://insideevs.com/news/528346/ev-weight-per-battery-capa...

> autonomous driving

roll out only, performance of the rolled out solution is not so impressive. This is also because they use fewer sensors.

Very misleading to include hybrids in “EV sales”.

Yeah especially with his filing saying he’s waiving BDD. That’s a tough one to escape. He’s claiming that Twitter has made a material misstatement on their public filings. I’m sure that disclosure has been heavily diligenced.

Worst case there are some wrong statements in Twitters fillings. Thise have to be incredibly severe to have an impact on Musk's obligation to purchase Twitter. A simple filing error or mistake is most likely not enough.

Do they always have the option of settling at any point in the process? Like if Musk said "$20 billion penalty but I don't buy the company", I assume they'd say yes? (Or substitute a bigger number if not.)

So are they just negotiating at this point if Musk has a penalty number he's willing to pay?

Twitter and Musk already agreed to a 1 billion dollar penalty. He’s trying to get out of it, even though he already waved due diligence.

The $1B scenario doesn’t apply here. He’s on the hook for $44B.

Do you have a simple and short explanation for why?

The $1bn is in case something else makes the closing impossible (a regulatory decision, for example).

Because taking a corporation private is a pain in the ass.

Elon Musk signed a contract giving himself essentially no ability to back out, to force Twitter to consider his offer.

Good explanation..

https://news.ycombinator.com/item?id=32027646

My bet is on this.

They will just negotiate. Nobody wants to go through a lengthy legal process.

I think the number will be at 5b. Because, at 5b, Twitter gets a 1y revenue for virtually no cost. Twitter doesn't want to sell to a buyer who doesn't actually want to buy. It's not good for anyone.

Imagine Musk buying Twitter and starting open up exec emails knowing about the bot numbers being inaccurate.

Not sure. Twitter board members have a fiduciary duty towards shareholders. If they accept a lot less than they could get by simply enforcing the rules (at a comparatively negligible cost) because they don't want to look mean, I reckon there's a very high probability that they will get sued by some hedge fund.

People keep throwing this word around... yet the board accepted the first offer from Elon with no negotiation. Nobody is suing twitter board for this.

Who does that? Even new grad negotiates their offer...

People with no other options take their first offer. Negotiating is for people with alternatives.

My guess is that they floated the price to a lot of potential acquirers during the poison pill debacle, then they got nothing higher.

New grad with no other offers still negotiate...

Not even negotiating once is just very odd.

New grads with no offers still try, but their only alternative is "I say no and keep looking." Twitter's board's alternative is "I say no and get sued by shareholders." Negotiation only works if you can walk away, and it's not uncommon in business deals to accept the first offer if it is generous enough.

At $5bn Twitter & its board open themselves up to getting sued by the shareholders who were harmed for $16bn currently.

What Twitter as a company "wants" is kinda irrelevant. They have a fiduciary responsibility to their shareholders, and telling all those shareholders they just didn't feel like getting a $54.20/share deal because they didn't like the buyer and didn't want to be bought isn't really going to fly.

So any settlement will come with a requirement for Twitter to reasonable demonstrate to share holders that they haven't been harmed. And since all signs point to Twitter having the much stronger case, it's hard to imagine them just accepting much less than either the original purchase, or a penalty fee of closer to $16bn (the current gap between the share price & the purchase price)

The state of Delaware has consistently given boards wide discretion to act as they see fit in their fiduciary duty. Unless stock holders can prove the board acted in bad faith it will be very hard to win a case against them.

>consistently given boards wide discretion to act as they see fit in their fiduciary duty

That discretion is highly limited in the context of an acquisition, where there's a high risk of conflicts of interest between the Board and Shareholders. Delaware courts have consistently limited the Business Judgement Rule in takeover situations.

> Twitter gets a 1y revenue for virtually no cost.

This is not between Twitter and Musk. This is between Twitter shareholders and Musk. Twitter board is just working on their behalf. Shareholders don't care about Twitter's future now when they have very tight agreement. There will be judgement against Musk almost certainly.

Musk made $44B deal. However this ends, Musk is in hook for tens of billions. Either he pays $44B and gets Twitter or he pays the difference between $44B and current valuation when the deal is made, say $20B and current owners keep Twitter.

Musk has no upper hand. He made a huge mistake.

I think the best he can hope for here is settle the lawsuit that will follow for buying twitter at a slightly reduced price.

The amount he would pay to walk away is roughly equal to the current fair market value of Twitter. I wouldn't be happy to pay that and get nothing for it. Better to go through with the deal.

> Imagine Musk buying Twitter and starting open up exec emails knowing about the bot numbers being inaccurate.

There's different levels of knowing about inaccuracies.

There's knowing that your methods of determining bots are probably not optimal and the number is most likely undercounted, but it was a good faith albeit imperfect effort.

Then there's knowing that bots are actually some other specific number and suppressing that information.

I think the former is much, much more likely than the latter and wouldn't really be a huge controversy if it leaked.

Apart from that, out of 5000 employees, you can bet there is one employee disagreeing in email and that employee's opinion is discarded.

There is at least one person disagreeing on any topic.

It is a risky situation all around.

I reckon that good faith is not enough.

This is going to be one of those HN posts that will not age well, isn't it

Much easier to say of any single specific guess/prediction when there are lots of possible outcomes, than to actually guess the right one.

Twitter even admitted to overcounting its users: https://techcrunch.com/2022/04/28/twitter-says-it-overcounte...

By 1%, and they corrected it?

This whole article and their filings avoid using percentages, specifically because it’s misleading at their size. Absolute numbers make more sense.

Regardless, “this is not the first time Twitter reported erroneous metrics around users” is the problem with them.

Why you think absolute number make more sense ?

Well, even by percentage, 1 in 100 users at their scale is massive.

More context: https://dataschool.com/misrepresenting-data/relative-vs-abso...

The article says to use both - not a preference for using absolute numbers at large scales.

Are you just being pedantic, or do you have a point? I’ve stated my stance.

Your stance is that 1% is a large amount, people don't understand why you think this is a large amount other than 1% of large numbers happen to be large figures.

Doesn’t matter, courts won’t rule that a materially adverse effect

What if they have willfully misrepresented the amount of bots on the platform and lied about it to shareholders for years. MAUs are a big part of any social networks valuation metrics.

It's a terrible contract: no due diligence, a specific performance clause. The only type of person who would ever sign a contract like that would be a dumb guy who got rich by accident.

Or someone whose ego is so inflated and actions are on a whim due to being vastly rich that he just had a wild hair up his ass and said he'd buy Twitter. Remember, the Twitter buyout bullshit was after he'd done some shenanigans failing to report buying Twitter shares. People complained (on Twitter no less) and he literally went "oh well I'll just buy Twitter then." Egg on face now that he's seen just how utterly insane his proposal was.

Musk really strikes me as bipolar or something, and that he agreed to buy Twitter in a manic episode and now the party's over.

Yes, but even if they take him to court, it's highly likely that Musk and his legal team drag this out. It's not going to be a simple case. No contract law case ever is. And at that point, Twitter's business might keep suffering, to the point that their fair market value plummets, and they enter a very difficult financial situation. Then Musk can swoop in with a much lower price offer and they will accept simply due to their financial position and not being able or willing to continue the case in the courts. I think Musk will end up buying Twitter but at a much lower price.

I believe the agreement between Twitter and Musk had a $1B acquisition cancellation clause built into in, so if Musk can't successfully argue for breach of contract he'll have to pay this $1B break-up fee, rather than be forced to complete the purchase.

That’d be a nice infusion of capital for Twitter. And maybe that’s the best case scenario outcome that they’re actually hoping for.

The contract includes a specific performance clause, so it's not as simple as a $1B break up fee.

You may be correct, but if you think Musk will actually buy Twitter at 54.20 now, I have a bridge to sell you. He can pay enough lawyers to hold up this transaction for years. "Time kills all deals", as they say.

Musk stated that 50% of the users are bots and that Twitter is hiding this.

If true, he’s got an out.

IIRC there’s just a $1B penalty in the acquisition clause for Musk if the transaction doesn’t go through.

You don’t remember correctly.

The breakup fee is if an outside influence prevents the deal from going through. It’s not just for cases of “uh-uh i don’t wanna.”

> Thus, the courts will obligate Musk to buy the business as he agreed to in April.

That last statement does not follow everything else before. Courts have no power to do that.

Why wouldn't courts have the power to do that? If the court rules you have no grounds to terminate the contract then you will have to execute the contract as originally agreed upon.

Can they force all the banks that agreed to loan them money to go through with it?

They can force Musk to sell his other assets to complete the deal.

They can force his banks to sell enough Tsla shares to buy it

The banks also signed contracts stating they’d loan the money using Tesla shares and Twitter equity as collateral. They can’t get out of that contract just because musk wants them too.

How Musk gets the money in order to fulfill a contract he's entered into is immaterial unless he goes completely insolvent and still can't fulfill it, which will not be the case.

As long as Musk has ~40 billion of Tesla stock and can get ~20 billion additional dollars in cash (can get, not just has already), yes.

Well the court could obligate Musk to pay damages. One (simplistic) possibility might be to take the value Musk agreed to pay minus the current value of Twitter and force Musk to pay that. Then in theory Twitter would have received same value in the end.

Yes they do, it's called specific performance. It's not the usual remedy for breach of contract, but in certain cases the court will grant it. I believe M&A agreements are one category of cases where US courts are inclined to grant specific performance, but I'm no expert.

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