7 ms·

Why would Twitter settle with Musk after they win specific performance in court?

leereeves 4y ago
To avoid a long appeals process. After the 2010 Deepwater Horizon oil spill, BP dragged the legal process out for over five years. And this dispute, while involving similar amounts of money, doesn't seem to have the same moral urgency to speed it along.
- parkingrift 4y ago
  Completely different type of lawsuit, and in a completely different court. There is decades of precedence here. It takes doesn’t take long to decide these cases, and the appeals are quick. This will all be over before the end of the year.
toomuchtodo 4y ago
To prevent ownership by someone who doesn't want to own you. That leads to ruin.
- Cederfjard 4y ago
  This is the board and shareholders. They wouldn’t be ”you” anymore after they sell. Why would they care about what happens to Twitter after they’ve gotten their money?
  - toomuchtodo 4y ago
    My thesis is that while $1B isn't enough for Twitter to walk away, there are likely enough shareholders who want the enterprise to continue after taking a settlement (between $1B and $44B) due to ongoing value creation that a settlement is more likely. Could shareholders be satisfied to take $44B to then incinerate Twitter with Musk owning it privately? I suppose that is possible, but doesn't feel like the narrative from majority shareholders (based on what was public during earlier events). People and motives are tricky!
- extheat 4y ago
  That would lead to more shareholder lawsuits. The $54.20 cash deal is like a golden carrot on a stick, seeing what happened to Snap and the cloudy economic outlook means they would tank in value if Musk sells his shares. They have no choice but to accept it.
  - kevinventullo 4y ago
    I could imagine them settling on Musk paying a penalty of the difference between $54.20 and the current price, and then immediately distributing that penalty to each shareholder (including Musk!). Or maybe a smaller penalty in combination with Musk forfeiting his current shares which would be a kind of “buyback” to help make the shareholders whole.
    - extheat 4y ago
      If the payout would be substantial, it would be dumb for Musk team not accept and buy Twitter at that point and do a later IPO at a new price after restructuring. There’s not much for Musk to loose by playing it out like this. In the end they buy it, they don’t, or they settle before then. Paying a large fine is in neither sides best interest. Twitter shareholders have to get the best result : anything less than $50/share would likely be a nonstarter if closing remains an option.
- parkingrift 4y ago
  This is a total buyout. There is no “you” left after the deal. Total liquidation of all shareholders.
moralestapia 4y ago
(Warning: speculation) Because a sentence and how it is carried out are two (sometimes wildly) different things. Musk could lose the case and still drag the actual execution of his obligations for years. Levine pointed out yesterday that some of the agreements Musk has in place to fund this operation will expire on April 2023, so he could wait until that date and say "whoops, I can't afford it now". I have no idea if that would stick but this case has been unusual since day zero. The most important thing for Twitter is to get out of this mess, honestly, the sooner the better.
- fooey 4y ago
  I believe something around $30b of the $44b is backed personally by Musk Basically all of Musks "money" is in the US, and much of it is even in Delaware Corporations. The judge can very easily extract whatever it takes from Musk if it comes to that.
  - moralestapia 4y ago
    It goes like this: * 13B from a party of banks (i.e. Morgan Stanley and friends), in exchange for who knows what (private equity?) * 12.5B from pretty much the same party of banks but as a loan that takes Musk's TSLA stock as collateral * 21B from Musk itself (idk under what conditions) So he could easily "not afford it" if he wanted to.
    - deleted 4y ago
      [deleted]
    - AnimalMuppet 4y ago
      Courts take a real dim view of that kind of game. When a billionaire "can't afford" to pay a court judgment, the courts don't just shrug and say "stuff happens". They know when they're being played, and they can play back a lot harder than Musk can.
    - TheCoelacanth 4y ago
      That's how he planned to finance it, but I don't see why a court would limit itself to those assets. Unless his net worth drops by about 75%, he can afford it.
xenadu02 4y ago
It is highly likely that Musk's financing will pull out if they haven't already. The market is down so the value of his existing wealth has dropped. Musk may not have the resources to close the deal. If they force him into bankruptcy they aren't going to get $44b. They might have a number in mind that they're aiming for to back away - say $10b. They might also have him agree not to start a potential competitor for 10 years. On the flip side they might think the markets will remain down for some time and the premium price is worth going full scorched earth on Musk. In that case he'll have to eat some punitive financing costs or file bankruptcy - most likely the latter because I can't see him giving up his stake in Tesla and SpaceX.
- rurp 4y ago
  The financing is already committed, the banks don't have any more right break a contract for convenience than Musk or Twitter do. > If they force him into bankruptcy they aren't going to get $44b. Why not? He appears to still have the non-financed amount well covered by his Tesla, SpaceX, and other assets. Even if markets implode much further they'll still be able to recoup much more than the $1B cost Musk is hoping to get away with.
- ksherlock 4y ago
  If the financing pulls out, the acquisition is canceled and there's a $1 billion termination fee. 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.
tptacek 4y ago
Because they'll get both money and Twitter's assets, and there is some number between $1B and $44B where Twitter will be happy to have both. Twitter isn't worth $44B right now, but, contra message board takes, it's also not worth close to $0.

To avoid a long appeals process. After the 2010 Deepwater Horizon oil spill, BP dragged the legal process out for over five years. And this dispute, while involving similar amounts of money, doesn't seem to have the same moral urgency to speed it along.

parkingrift 4y ago
Completely different type of lawsuit, and in a completely different court. There is decades of precedence here. It takes doesn’t take long to decide these cases, and the appeals are quick. This will all be over before the end of the year.

toomuchtodo 4y ago

To prevent ownership by someone who doesn't want to own you. That leads to ruin.

Cederfjard 4y ago
This is the board and shareholders. They wouldn’t be ”you” anymore after they sell. Why would they care about what happens to Twitter after they’ve gotten their money?
- toomuchtodo 4y ago
  My thesis is that while $1B isn't enough for Twitter to walk away, there are likely enough shareholders who want the enterprise to continue after taking a settlement (between $1B and $44B) due to ongoing value creation that a settlement is more likely. Could shareholders be satisfied to take $44B to then incinerate Twitter with Musk owning it privately? I suppose that is possible, but doesn't feel like the narrative from majority shareholders (based on what was public during earlier events). People and motives are tricky!
extheat 4y ago
That would lead to more shareholder lawsuits. The $54.20 cash deal is like a golden carrot on a stick, seeing what happened to Snap and the cloudy economic outlook means they would tank in value if Musk sells his shares. They have no choice but to accept it.
- kevinventullo 4y ago
  I could imagine them settling on Musk paying a penalty of the difference between $54.20 and the current price, and then immediately distributing that penalty to each shareholder (including Musk!). Or maybe a smaller penalty in combination with Musk forfeiting his current shares which would be a kind of “buyback” to help make the shareholders whole.
  - extheat 4y ago
    If the payout would be substantial, it would be dumb for Musk team not accept and buy Twitter at that point and do a later IPO at a new price after restructuring. There’s not much for Musk to loose by playing it out like this. In the end they buy it, they don’t, or they settle before then. Paying a large fine is in neither sides best interest. Twitter shareholders have to get the best result : anything less than $50/share would likely be a nonstarter if closing remains an option.
parkingrift 4y ago
This is a total buyout. There is no “you” left after the deal. Total liquidation of all shareholders.

moralestapia 4y ago

(Warning: speculation) Because a sentence and how it is carried out are two (sometimes wildly) different things. Musk could lose the case and still drag the actual execution of his obligations for years. Levine pointed out yesterday that some of the agreements Musk has in place to fund this operation will expire on April 2023, so he could wait until that date and say "whoops, I can't afford it now". I have no idea if that would stick but this case has been unusual since day zero. The most important thing for Twitter is to get out of this mess, honestly, the sooner the better.

fooey 4y ago
I believe something around $30b of the $44b is backed personally by Musk Basically all of Musks "money" is in the US, and much of it is even in Delaware Corporations. The judge can very easily extract whatever it takes from Musk if it comes to that.
- moralestapia 4y ago
  It goes like this: * 13B from a party of banks (i.e. Morgan Stanley and friends), in exchange for who knows what (private equity?) * 12.5B from pretty much the same party of banks but as a loan that takes Musk's TSLA stock as collateral * 21B from Musk itself (idk under what conditions) So he could easily "not afford it" if he wanted to.
  - deleted 4y ago
    [deleted]
  - AnimalMuppet 4y ago
    Courts take a real dim view of that kind of game. When a billionaire "can't afford" to pay a court judgment, the courts don't just shrug and say "stuff happens". They know when they're being played, and they can play back a lot harder than Musk can.
  - TheCoelacanth 4y ago
    That's how he planned to finance it, but I don't see why a court would limit itself to those assets. Unless his net worth drops by about 75%, he can afford it.

xenadu02 4y ago

It is highly likely that Musk's financing will pull out if they haven't already. The market is down so the value of his existing wealth has dropped. Musk may not have the resources to close the deal. If they force him into bankruptcy they aren't going to get $44b. They might have a number in mind that they're aiming for to back away - say $10b. They might also have him agree not to start a potential competitor for 10 years. On the flip side they might think the markets will remain down for some time and the premium price is worth going full scorched earth on Musk. In that case he'll have to eat some punitive financing costs or file bankruptcy - most likely the latter because I can't see him giving up his stake in Tesla and SpaceX.

rurp 4y ago
The financing is already committed, the banks don't have any more right break a contract for convenience than Musk or Twitter do. > If they force him into bankruptcy they aren't going to get $44b. Why not? He appears to still have the non-financed amount well covered by his Tesla, SpaceX, and other assets. Even if markets implode much further they'll still be able to recoup much more than the $1B cost Musk is hoping to get away with.
ksherlock 4y ago
If the financing pulls out, the acquisition is canceled and there's a $1 billion termination fee. 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.

tptacek 4y ago

Because they'll get both money and Twitter's assets, and there is some number between $1B and $44B where Twitter will be happy to have both. Twitter isn't worth $44B right now, but, contra message board takes, it's also not worth close to $0.