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Comment by pc86 | Hacker News Reader

I mean there's a $1B break-up fee in the contract. I don't know why he doesn't just pay that and end the fiasco (also tanking Twitter's stock momentarily, hell he could make back a chunk of that in the derivative market most likely).

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.

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> I mean there's a $1B break-up fee in the contract. I don't know why he doesn't just pay that and end the fiasco...

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.

https://www.sec.gov/Archives/edgar/data/1418091/000119312522...

>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.

It's not written as a choice Musk has. That fee only comes into play if the deal fails to go through for reasons outside of his control.

Your ... leaves out the "specified limited circumstances". If you read those you'll note none of them include Musk changing his mind.

1 is the "specified limited circumstances", that is Twitter does what it is supposed to do, and Musk "fails to consummate the Merger". It doesn't say why he fails just if he does.

Except you cut part of the sentence there. The full clause is

"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.

Because it’s not a break up fee.

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.

Actually damages would not be capped at $1B. The $1B penalty is failing to close through no fault of his own, ex he's unable to secure financing. That ship has long since sailed.

There is another reply to another of your comments explaining why this is not true, and paragraph (1) of that clause covers Musk just choosing to walk away.

Except it doesn't. The full clause you are discussing:

The comment conviently cut the first part of the sentence where the clause is effective if the acquisition is terminated by Twitter.

There's no law capping monetary damages at $1B and you can't enter into a contract limiting the government's ability to do much of anything unless the other party is the government. So even if the contract caps monetary damages (it doesn't), no court would follow that.

Not sure why you'd need a specific law. I'm not an expert (or lawyer) but damage caps are a pretty common feature of big contracts and AFAIK they're perfectly enforceable.

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.

The $1B isn't sufficient, though. He would be subject to some serious scrutiny by the SEC.

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.

The $1B is a breakup fee if the deal failed for circumstances outside of his control.

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.

As I understand it, the $1B purchase agreement clause isn't a "breakup fee" per se - it's not something he could just choose to pay to be able to walk away from the deal. It pertains to some legalese "specific performance" conditions under which the deal wouldn't be able to go thru.

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!

There was no catch-all "if you change your mind, just pay us $1B and we'll walk our separate ways" clause in the contract.

https://www.cnbc.com/2022/05/13/elon-musk-cant-just-walk-awa...

The $1 billion clause is only if a 3rd party halts the deal.

Elon Musk can't invoke that clause. Only US government, or EU, or maybe a bank can invoke that.

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