But this is very good for Twitter shareholders.
Forcing the deal is important for US Contract law in general. When people sign documents, they must be solid with the courts enforcing the contract. We can't just let one person give up deals after the fact.
I don't even know what the worst/best case scenarios would be here.
If he's right about Twitter, now he has essentially a toxic asset and everyone knows it. But he made a bad deal in the worst way. No one is buying it from him. And people are going to be more hesitant to deal with him in the future. Because he's obviously not doing due diligence.
If he's wrong, it's not a good look for him either and while someone may eventually buy Twitter off of him, he'll likely have trouble with other deals still. Because of the diligence issue, and his conduct through this ordeal.
Like, who is coming out of this deal happy?
TWTR shareholders are being paid $54.20 per share for a company worth probably only $30/share (maybe less, now that Elon spent months trash talking the deal)
TWTR shareholders are going to be throwing parties all around the country with a big windfall. I know a bunch of online people who also put option plays on this.
I don't agree - I think there's a win for the Twitter shareholders, for example. There's also a win for precedent here, where a billionaire can't just say "j/k no I don't want it" because they've realised it's a bad idea.
> Like, who is coming out of this deal happy?
It doesn't really matter who is happy IMO. I'm not one for revenge justice, but nobody needs to be happy if one person makes a series of incredibly dumb decisions, signs multiple legally binding contracts along the way, and then changes their mind after the fact due to information that they claimed was the reason they were undertaking the deal in the first place.
The $1B is for a different scenario; he doesn't have the option to back out of the deal voluntarily.
https://www.cnbc.com/2022/05/13/elon-musk-cant-just-walk-awa...
> A reverse breakup fee paid from a buyer to a target applies when there is an outside reason a deal can’t close, such as regulatory intermediation or third-party financing concerns.
Oh, yeah I do know. Because the $55B is other people's money, and the $1B would be his money. So his choices at this point are 1) get out of the deal for approximately $0, 2) get out of the deal for approximately $1B, 3) buy Twitter for approximately $0.
Pretty clear why #2 isn't being considered.
https://www.cnbc.com/2022/05/13/elon-musk-cant-just-walk-awa...
Elon Musk can't invoke that clause. Only US government, or EU, or maybe a bank can invoke that.
No breakup fee was specified for 'the deal failed because he got cold feet'. That's one of the reasons the deal was so bizarre. He wrote it, and he wrote it in a matter that did not give him much room to maneuver.
He can’t just say “I’m out, here’s a billion dollars for your trouble.” Twitter can (and did) sue for specific performance (forcing Musk to close the sale). If the court decides to award monetary damages instead of specific performance that’s capped to $1B but it’s not a simple break up fee.
Also most of the purchase will be Musks money too. Financially he’s much better off paying $1B than buying Twitter at the contract price today.
"Specifically, this termination fee is payable by Parent to Twitter if the Merger Agreement is terminated by Twitter because (1) the conditions to Parent’s and Acquisition Sub’s obligations to consummate the Merger are satisfied and the Parent fails to consummate the Merger as required pursuant to, and in the circumstances specified in, the Merger Agreement;"
The comment conviently cut the first part of the sentence where the clause is effective if the acquisition is terminated by Twitter.
The legal commentary I've seen on this deal states that monetary damages are capped at $1B (and actual damages would obviously be much higher) so the two outcomes are basically 'Musk forced to buy Twitter' and 'Musk pays Twitter $1B' without much in between. Assuming the lawyers who took the time to read the contract know what they're talking about it would be a pretty big surprise for the Delaware Chancery to throw out the contract and award higher monetary damages.
People keep repeating this wildly untrue thing as if it is fact. The merger contract is a public document. Show us where it says he can just pay $1B and walk away if he changes his mind.
>Upon termination of the Merger Agreement under other specified limited circumstances, Parent will be required to pay Twitter a termination fee of $1.0 billion. ...
(1) the conditions to Parent’s and Acquisition Sub’s obligations to consummate the Merger are satisfied and the Parent fails to consummate the Merger as required pursuant to, and in the circumstances specified in, the Merger Agreement; or (2) Parent or Acquisition Sub’s breaches of its representations, warranties or covenants in a manner that would cause the related closing conditions to not be satisfied. Mr. Musk has provided Twitter with a limited guarantee in favor of Twitter (the “Limited Guarantee”). The Limited Guarantee guarantees, among other things, the payment of the termination fee payable by Parent to Twitter, subject to the conditions set forth in the Limited Guarantee.
I am not contract law knowledgeable, but how is 1 not a get out of it for a billion clause that you say is untrue.
"Specifically, this termination fee is payable by Parent to Twitter if the Merger Agreement is terminated by Twitter because (1) the conditions to Parent’s and Acquisition Sub’s obligations to consummate the Merger are satisfied and the Parent fails to consummate the Merger as required pursuant to, and in the circumstances specified in, the Merger Agreement;"
The "terminated by Twitter" is important. Musk does not have the right to terminate. Twitter has not terminated the acquisition.
Note that Musk's immediate loss, if the deal goes thru at $44B, is going to be way over $1B (more like $10B perhaps) compared to what the market had been valuing the company at, so I'm pretty sure he'd have jumped at the chance to back out for "only" $1B if that was an option!
The $55B isn't all other people's money. He sold a ton of Tesla stock to put up his share (about half, IIRC). That alone would draw SEC ire, manipulating the Tesla stock price under apparently false pretenses.
I suspect that this is the reason his lawyers finally got through to him: go through with the deal or be in very big trouble. He will spend a lot of his own money on it, but he does at least get a major social media corporation for that money.
Whether it's worth it, either in future earnings or in the power he gets from it... I have no idea. Probably not, seeing how poorly considered the whole thing has been so far. But then I don't see the appeal of Twitter at all, so I can't predict what will happen to it in the future.
Sucks for them, but crappy acquisitions are a fact of life for online communities. Much like when Tumblr changed owners a few years back and the community was devastated.
Twitter was NOT looking for a buyer before any of this happened.
Edit: There's also something to be said about Truth Social censoring users, and it being a platform owned by someone who's highly likely to try to be president a second time. See what I mean about how everyone weaponizes social media for their own gains?
Next time, Elon tweets about buying something, wait for the market to go up, short the stock and make money when Elon eventually backs off?
Internet: Elon is manipulating the beef markets!