4 ms·

No. The $1B breakup fee is only applicable if the deal falls apart for very specific reasons (trouble getting financing, regulatory concerns, etc). Musk cannot

No. The $1B breakup fee is only applicable if the deal falls apart for very specific reasons (trouble getting financing, regulatory concerns, etc). Musk cannot just wake up one morning, decide to not buy Twitter, and pay the breakup fee. He has already agreed to buy Twitter and cannot back out. That is why the bot issue is so important. If Musk can prove that Twitter made false claims to the SEC, he is allowed to get out of the deal. But if not, he must buy Twitter

newaccount2021 4y ago
cmeacham98 4y ago
NAL - what happens if Musk just refuses to do it and never sends the money? Can Twitter get a court order to garnish Musk's bank account and/or assets for $40B?
- ceejayoz 4y ago
  They'd sue for the $1B cancellation fee, I'd imagine.
  - ahahahahah 4y ago
    FFS, this exact thread points out that there is no $1B cancellation fee.
    - falcolas 4y ago
      https://www.sec.gov/Archives/edgar/data/0001418091/000119312522120461/d310843dex21.htm https://www.sec.gov/Archives/edgar/data/0001418091/000119312... Do a search for "Parent Termination Fee". TL;DR: There is indeed a $1B termination fee.
      - papercrane 4y ago
        Do a search in the same document for "Specific Performance".
      - tsimionescu 4y ago
        The fee is to be payed by Musk if the deal falls through for a few soecific reasons: either his financing falls through or a few other conditions (for example, USA blocks the deal).
        naveen99 4y ago
        doesn't seem fair for either party to have to pay a fee if USA blocks the deal.
        tsimionescu 4y ago
        Doesn't seem fair to shareholders to initiate a buyout procedure that doesn't go anywhere - there is a significant cost to the company because of the pending offer. The same can't be said for the party that initiated the offer. So, the party that initiates the offer also has to include the chance of regulatory action blocking the deal in their estimates, and decide if paying $1B in that contingency is worth. Musk certainly did, or else he wouldn't have signed the contract. For example, in the case of this acquisition, it seems almost impossible for the government to step in - so, the expected value (in the probability theory sense) of the downside is close to 0.
    - ceejayoz 4y ago
      Incorrectly. > The Merger Agreement also provides that Twitter, on one hand, or Parent and Acquisition Sub, on the other hand, may specifically enforce the obligations under the Merger Agreement, except that Twitter may only cause Mr. Musk’s equity financing commitment to be funded in circumstances where the conditions to Parent’s and Acquisition Sub’s obligations to consummate the Merger are satisfied and the debt and margin loan financing is funded or available. As described above, if the conditions to Parent’s and Acquisition Sub’s obligations to complete the Merger are satisfied and Parent fails to consummate the Merger as required pursuant to the Merger Agreement, including because the equity, debt and/or margin loan financing is not funded, Parent will be required to pay Twitter a termination fee of $1.0 billion. https://www.sec.gov/Archives/edgar/data/1418091/000119312522120474/d310843ddefa14a.htm https://www.sec.gov/Archives/edgar/data/1418091/000119312522...
      - ahahahahah 4y ago
        Ugh, yes, nobody is disputing that. The comment I replied to was using the common, but incorrect, understanding of that to be like a fee that musk would have to pay to cancel the deal, which is pointed out as being an incorrect understanding (and which the text that you quoted also points out is an incorrect understanding). Like, of course, if we just change the meaning of words, then things stated in response to those words may be incorrect.
    - Clent 4y ago
      Correct. It is not a cancellation fee. Musk cannot cancel the contract, only a court can make that determination after concluding that Musk is unable to finance the deal. I am not a lawyer so I am quite curious as to how that plays out. Assuming he has it, could the courts force him to sell $40B in assets?
      - dragonwriter 4y ago
        > Assuming he has it, could the courts force him to sell $40B in assets? In principal, courts could either order him to complete the buyout (specific performance) or make those injured by his failure to do so whole (money damages). If they chose the former and he continued to fail to do so, he could be punished for contempt of court, either civil contempt (including, e.g., progressive fines and/or imprisonment until and unless he complied) or criminal contempt (fines or imprisonment of a set amount of period.)
- falcolas 4y ago
  I'm NAL either, but most lawyers speaking on this, with knowledge of the clauses thrown into these contracts speculate that he'd be taken to court for breach of contract. IIRC, previous acquisitions that were attempted to be weaseled out of were forced to go through by the courts, when the acquisitor's finances weren't the issue. EDIT: Ooh, the contract is public. Guess that makes sense, as it's a public company. Relevant to this, but section 8.1.d is the stanza relevant to this discussion. And the Act I definitions does define the "parent termination fee" at $1B. https://www.sec.gov/Archives/edgar/data/0001418091/000119312522120461/d310843dex21.htm https://www.sec.gov/Archives/edgar/data/0001418091/000119312... Found via: https://www.youtube.com/watch?v=_HuY9ZqFAsk https://www.youtube.com/watch?v=_HuY9ZqFAsk
- lmm 4y ago
  Eventually, yes - if they get a judgement against him and he doesn't pay, they can get an order to do that kind of thing. Same way the court system usually works.
tmp_anon_22 4y ago
I'm pretty sure most people saying Yes or No to this don't have the information or legal background to actually give that answer. Saying something confidently does not make it so.
- falcolas 4y ago
  Most folks are basing their opinions off the standard business acquisition contracts, which include limited exit opportunities for the buyer. Several of these contracts have even gone to court, so their typical clauses are public knowledge (including the verdicts), even if the specifics are not. EDIT: The actual contract is public (which makes sense, Twitter is public; a deal to buy would also be public). I have posted it in a sibling contract.
- wolverine876 4y ago
  > Saying something confidently does not make it so. Then why does (or did) everyone believe Musk? Why do they believe everything else said confidently on the Internet?
icedchai 4y ago
As I said in a previous thread, if this were true, the stock price would be higher. Options premiums would be much higher. They are not. The market already knows: he is not buying Twitter for 54.20.
- roflyear 4y ago
  Market is not always rational. Also it could take years and years for the deal to go through. It would require Twitter to sue musk and everyone to come to some kind of settlement. That settlement would likely be less than the price but not much less. Maybe a few percent less. It is also Musk. People know he's insane so that is an additional hit to the price. They know he'll do anything to get out of the deal. Doesn't mean he will.
  - icedchai 4y ago
    If you really believe the deal will go through as written, buy calls a couple years out. Anything is possible.
    - roflyear 4y ago
      True. I am not sure I really believe that. I think that is why the price is lower. My head knows the deal should go through - but I also know crazier things have happened.
gamblor956 4y ago
No, the agreement does not provide that Musk can withdraw from the agreement based on Twitter's (mis)representations to the SEC, as that is something that would have been covered by due diligence...which Musk waived. And indeed, Musk's own letter to the SEC confirms that his sole reason for seeking the data is that it relates to his ability to acquire financing for the deal. https://www.sec.gov/Archives/edgar/data/1418091/000110465922068347/tm2217761d1_ex99-o.htm https://www.sec.gov/Archives/edgar/data/1418091/000110465922...

newaccount2021 4y ago

cmeacham98 4y ago

NAL - what happens if Musk just refuses to do it and never sends the money? Can Twitter get a court order to garnish Musk's bank account and/or assets for $40B?

ceejayoz 4y ago
They'd sue for the $1B cancellation fee, I'd imagine.
- ahahahahah 4y ago
  FFS, this exact thread points out that there is no $1B cancellation fee.
  - falcolas 4y ago
    https://www.sec.gov/Archives/edgar/data/0001418091/000119312522120461/d310843dex21.htm https://www.sec.gov/Archives/edgar/data/0001418091/000119312... Do a search for "Parent Termination Fee". TL;DR: There is indeed a $1B termination fee.
    - papercrane 4y ago
      Do a search in the same document for "Specific Performance".
    - tsimionescu 4y ago
      The fee is to be payed by Musk if the deal falls through for a few soecific reasons: either his financing falls through or a few other conditions (for example, USA blocks the deal).
      - naveen99 4y ago
        doesn't seem fair for either party to have to pay a fee if USA blocks the deal.
        tsimionescu 4y ago
        Doesn't seem fair to shareholders to initiate a buyout procedure that doesn't go anywhere - there is a significant cost to the company because of the pending offer. The same can't be said for the party that initiated the offer. So, the party that initiates the offer also has to include the chance of regulatory action blocking the deal in their estimates, and decide if paying $1B in that contingency is worth. Musk certainly did, or else he wouldn't have signed the contract. For example, in the case of this acquisition, it seems almost impossible for the government to step in - so, the expected value (in the probability theory sense) of the downside is close to 0.
  - ceejayoz 4y ago
    Incorrectly. > The Merger Agreement also provides that Twitter, on one hand, or Parent and Acquisition Sub, on the other hand, may specifically enforce the obligations under the Merger Agreement, except that Twitter may only cause Mr. Musk’s equity financing commitment to be funded in circumstances where the conditions to Parent’s and Acquisition Sub’s obligations to consummate the Merger are satisfied and the debt and margin loan financing is funded or available. As described above, if the conditions to Parent’s and Acquisition Sub’s obligations to complete the Merger are satisfied and Parent fails to consummate the Merger as required pursuant to the Merger Agreement, including because the equity, debt and/or margin loan financing is not funded, Parent will be required to pay Twitter a termination fee of $1.0 billion. https://www.sec.gov/Archives/edgar/data/1418091/000119312522120474/d310843ddefa14a.htm https://www.sec.gov/Archives/edgar/data/1418091/000119312522...
    - ahahahahah 4y ago
      Ugh, yes, nobody is disputing that. The comment I replied to was using the common, but incorrect, understanding of that to be like a fee that musk would have to pay to cancel the deal, which is pointed out as being an incorrect understanding (and which the text that you quoted also points out is an incorrect understanding). Like, of course, if we just change the meaning of words, then things stated in response to those words may be incorrect.
  - Clent 4y ago
    Correct. It is not a cancellation fee. Musk cannot cancel the contract, only a court can make that determination after concluding that Musk is unable to finance the deal. I am not a lawyer so I am quite curious as to how that plays out. Assuming he has it, could the courts force him to sell $40B in assets?
    - dragonwriter 4y ago
      > Assuming he has it, could the courts force him to sell $40B in assets? In principal, courts could either order him to complete the buyout (specific performance) or make those injured by his failure to do so whole (money damages). If they chose the former and he continued to fail to do so, he could be punished for contempt of court, either civil contempt (including, e.g., progressive fines and/or imprisonment until and unless he complied) or criminal contempt (fines or imprisonment of a set amount of period.)
falcolas 4y ago
I'm NAL either, but most lawyers speaking on this, with knowledge of the clauses thrown into these contracts speculate that he'd be taken to court for breach of contract. IIRC, previous acquisitions that were attempted to be weaseled out of were forced to go through by the courts, when the acquisitor's finances weren't the issue. EDIT: Ooh, the contract is public. Guess that makes sense, as it's a public company. Relevant to this, but section 8.1.d is the stanza relevant to this discussion. And the Act I definitions does define the "parent termination fee" at $1B. https://www.sec.gov/Archives/edgar/data/0001418091/000119312522120461/d310843dex21.htm https://www.sec.gov/Archives/edgar/data/0001418091/000119312... Found via: https://www.youtube.com/watch?v=_HuY9ZqFAsk https://www.youtube.com/watch?v=_HuY9ZqFAsk
lmm 4y ago
Eventually, yes - if they get a judgement against him and he doesn't pay, they can get an order to do that kind of thing. Same way the court system usually works.

tmp_anon_22 4y ago

I'm pretty sure most people saying Yes or No to this don't have the information or legal background to actually give that answer. Saying something confidently does not make it so.

falcolas 4y ago
Most folks are basing their opinions off the standard business acquisition contracts, which include limited exit opportunities for the buyer. Several of these contracts have even gone to court, so their typical clauses are public knowledge (including the verdicts), even if the specifics are not. EDIT: The actual contract is public (which makes sense, Twitter is public; a deal to buy would also be public). I have posted it in a sibling contract.
wolverine876 4y ago
> Saying something confidently does not make it so. Then why does (or did) everyone believe Musk? Why do they believe everything else said confidently on the Internet?

icedchai 4y ago

As I said in a previous thread, if this were true, the stock price would be higher. Options premiums would be much higher. They are not. The market already knows: he is not buying Twitter for 54.20.

roflyear 4y ago
Market is not always rational. Also it could take years and years for the deal to go through. It would require Twitter to sue musk and everyone to come to some kind of settlement. That settlement would likely be less than the price but not much less. Maybe a few percent less. It is also Musk. People know he's insane so that is an additional hit to the price. They know he'll do anything to get out of the deal. Doesn't mean he will.
- icedchai 4y ago
  If you really believe the deal will go through as written, buy calls a couple years out. Anything is possible.
  - roflyear 4y ago
    True. I am not sure I really believe that. I think that is why the price is lower. My head knows the deal should go through - but I also know crazier things have happened.

gamblor956 4y ago

No, the agreement does not provide that Musk can withdraw from the agreement based on Twitter's (mis)representations to the SEC, as that is something that would have been covered by due diligence...which Musk waived. And indeed, Musk's own letter to the SEC confirms that his sole reason for seeking the data is that it relates to his ability to acquire financing for the deal. https://www.sec.gov/Archives/edgar/data/1418091/000110465922068347/tm2217761d1_ex99-o.htm https://www.sec.gov/Archives/edgar/data/1418091/000110465922...