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Im not a lawyer but I’m pretty confident that such a settlement or penalty would end up getting paid out to the current shareholders, or else it would be added

• abduhl 4y ago
  Why are you confident? Reverse the positions and imagine Twitter is the loser here and has to pay a billion dollars and legal fees to Elon. Do the shareholders each have to send in a check for the amount? Of course not; Twitter would pay it out of their corporate assets. Their stock price might go down because of the event, but the core idea for corporations is that shareholders are not liable for the corporation’s debts/liabilities and, conversely, shareholders have no general claim to the company’s assets (or rather they have the lowest priority claim after all other stakeholders).
  • wstuartcl 4y ago
    ffs the difference is the entity exists for the shares, the penalty for the breach impacted the shareholders -- what makes you think that when a merger judgment is filed that a penalty for the misacting buyer would simply be left on the balance sheet for that buyer to reabsorb? It would be split among shareholders and payable along with the judgment's merger price. Do shareholders generally have liability or claims to the entity (beyond things like duty and other shareholder legal protections), no. Are their mechanisms to disperse to shareholders? ffs yes. And if twitter was the loser here, and had to pay 1 billion (which I actually believe is not in the contract from what I read the 1 billion was a directed clause for a misacting buyer) then no the shareholders would not have to pay out of pocket. However, the 1 billion dollar loss would impact the books and probably hit the shareholders with stock pricing outcomes.