4 ms·

Doesn't it make financial sense for him to pay the 1bn breakup fee in order to avoid overpaying by 15bn w.r.t. the current stock price?

dawnerd 4y ago
Makes more financial sense to try to weasel out and say Twitter lied therefore the whole agreement is tossed out. This is Musk we're talking about.
elil17 4y ago
The breakup fee isn’t an option he can just use when he pleases. It’s only there as a fee he pays if outside forces prevent the deal from closing.
drexlspivey 4y ago
When the offer was announced most HN commenters speculated that the twitter board will never accept the $54.2 price because it was too low. They said that the fundamental value of the company was much higher since it was trading in the 70s only a few months prior. If the deal falls apart now the share price might fall into the 20s.
benjaminwootton 4y ago
In hindsight, some kind of clause about the market valuation moving by X% might have been a good idea. Not sure how you would contract for that, but the actual value of the asset has significantly declined.
- JumpCrisscross 4y ago
  > some kind of clause about the market valuation moving by X% might have been a good idea Collars are not uncommon in M&A agreements. Diligence clauses, far more common. Neither made it into the final agreements negotiated in this case. Hence the drama.
  - benjaminwootton 4y ago
    Not sure if it’s Elons arrogance or bad lawyering but that seems extremely negligent. The “market” price of the asset could move for all manner of unanticipated reasons.
jerf 4y ago
Isn't it $1 billion in both directions? If he can establish that they didn't do their part, he gets $1 billion IIRC. Either way it's a sum of money in which a lawsuit is effectively inevitable, by very simple game theoretic analysis. The amount of confidence in losing one would need in order to not even try with that amount at stake would be sky high and I doubt either side could end up that confident that a judge wouldn't at least partially rule in their favor.
- TheCoelacanth 4y ago
  Section 8.3[1] of the contract covers that. There are very limited circumstances where Twitter would pay, and none of them are likely to happen. Twitter would pay in these circumstances: > (i) (A) a Third Party shall have made a Competing Proposal ... > (ii) this Agreement is terminated by the Company pursuant to Section 8.1(c)(ii); or > (iii) this Agreement is terminated by Parent pursuant to Section 8.1(d)(ii) (i) and (ii) involve competing offers to acquire Twitter, which I don't think are likely given market conditions. (iii) is defined in Section 8.1(d)(ii) > (ii) prior to the receipt of the Company Stockholder Approval, if the Company Board shall have made an Adverse Board Recommendation Change. "Adverse Board Recommendation Change" is defined in length in Section 6.5(d), but basically means that the board recommended shareholders to reject the deal. [1] https://www.sec.gov/Archives/edgar/data/1418091/000119312522120461/d310843dex21.htm https://www.sec.gov/Archives/edgar/data/1418091/000119312522...

dawnerd 4y ago

Makes more financial sense to try to weasel out and say Twitter lied therefore the whole agreement is tossed out. This is Musk we're talking about.

elil17 4y ago

The breakup fee isn’t an option he can just use when he pleases. It’s only there as a fee he pays if outside forces prevent the deal from closing.

drexlspivey 4y ago

When the offer was announced most HN commenters speculated that the twitter board will never accept the $54.2 price because it was too low. They said that the fundamental value of the company was much higher since it was trading in the 70s only a few months prior. If the deal falls apart now the share price might fall into the 20s.

benjaminwootton 4y ago

In hindsight, some kind of clause about the market valuation moving by X% might have been a good idea. Not sure how you would contract for that, but the actual value of the asset has significantly declined.

JumpCrisscross 4y ago
> some kind of clause about the market valuation moving by X% might have been a good idea Collars are not uncommon in M&A agreements. Diligence clauses, far more common. Neither made it into the final agreements negotiated in this case. Hence the drama.
- benjaminwootton 4y ago
  Not sure if it’s Elons arrogance or bad lawyering but that seems extremely negligent. The “market” price of the asset could move for all manner of unanticipated reasons.

jerf 4y ago

Isn't it $1 billion in both directions? If he can establish that they didn't do their part, he gets $1 billion IIRC. Either way it's a sum of money in which a lawsuit is effectively inevitable, by very simple game theoretic analysis. The amount of confidence in losing one would need in order to not even try with that amount at stake would be sky high and I doubt either side could end up that confident that a judge wouldn't at least partially rule in their favor.

TheCoelacanth 4y ago
Section 8.3[1] of the contract covers that. There are very limited circumstances where Twitter would pay, and none of them are likely to happen. Twitter would pay in these circumstances: > (i) (A) a Third Party shall have made a Competing Proposal ... > (ii) this Agreement is terminated by the Company pursuant to Section 8.1(c)(ii); or > (iii) this Agreement is terminated by Parent pursuant to Section 8.1(d)(ii) (i) and (ii) involve competing offers to acquire Twitter, which I don't think are likely given market conditions. (iii) is defined in Section 8.1(d)(ii) > (ii) prior to the receipt of the Company Stockholder Approval, if the Company Board shall have made an Adverse Board Recommendation Change. "Adverse Board Recommendation Change" is defined in length in Section 6.5(d), but basically means that the board recommended shareholders to reject the deal. [1] https://www.sec.gov/Archives/edgar/data/1418091/000119312522120461/d310843dex21.htm https://www.sec.gov/Archives/edgar/data/1418091/000119312522...