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CNN Business
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The countdown is on for Elon Musk and Twitter close their $44 billion acquisition deal by Oct. 28 or be forced to prepare for a trial again after a judge agreed on Thursday suspend the legal proceedings.
What everyone is waiting for now: Musk must have the money to hand over.
Even the richest man in the world needs a little help with an acquisition of this size. In April, Musk announced that he had lined up $46.5 billion in funding for the deal, including two debt commitment letters from Morgan Stanley and other unnamed financial institutions (one for $13 billion and another for $12.5 billion, the latter having subsequently been reduced to 6.25 billion dollars). Musk himself has also committed around $21 billion in equity to fund the deal, and later raised Another $7 billion in equity from investors like Oracle founder Larry Ellison and cryptocurrency firm Binance.
Much of the sticking point between Musk and Twitter
(TWTR) now seems to be above the uncertainty surrounding the status of these funding agreements.
Musk’s team had said in a filing earlier Thursday that there was no need to pursue the ligature because he was committed to completing the deal on the terms originally agreed to and the banks that had committed a debt financing to help pay it were “working cooperatively to fund the closing.
Twitter – skeptical after Musk spent months trying to back out of the deal and also wanting to keep the pressure of a trial on him – opposed the stay. He raised concerns in a separate filing that an unnamed representative from one of the banks testified Thursday morning that Musk had yet to send a borrowing notice and “did not otherwise communicate to them that he intended to complete the transaction, let alone on a particular timeline.” Twitter also said Musk is expected to close the deal by next week.
Many legal experts believe Musk is seriously considering doing the deal this time around, the most certain anyone has sounded since he first said the deal was ‘on hold’ in May and decided to terminate. the agreement in July. Many people following the case believe Musk saw the writing on the wall that he stood to lose at trial and would be forced to buy Twitter anyway – spending more money and damaging the world more. business that he should eventually take over in the process.
“I think Musk intends to close the deal, and I think his reasons for not closing it this second are probably pretty simple,” said Ann Lipton, associate professor of business law at Tulane Law School. . The likely reasons, she said, relate to how long it takes Musk to finish putting together all of the previously announced funding deals in order to seal the deal.
Musk is likely trying to help Morgan Stanley market the debt to other investors before telling them to hand over the money to him to close the deal, according to Lipton. Although Musk doesn’t have to, it would do a bank a favor he’s had more than a year. ten year relationship given the economic environment is more difficult today than when the agreements were concluded.
Some have speculated whether Morgan Stanley and the other banks providing debt financing might try to pull out of the deal now because Twitter is arguably even less valuable now than when the deal was struck for the first time, after Musk spent months making statements about his shortcomings and watching the broader social media and digital advertising markets decline.
But the bank could face legal ramifications if it tries to renege on its pledge now.
“The only way they could get away with this is if they claim a significant adverse effect and that Twitter has changed so much since they agreed to the deal that they don’t want to fund the deal anymore,” said George Geis, professor of strategy at New York University. UCLA Anderson School of Management.
Even if the banks tried to pull out, Musk might not automatically be off the hook. Under the merger agreement, Musk could conceivably walk away from the deal with a $1 billion break payment to Twitter if his debt financing were to fail. However, if Delaware Chancery Court Chancellor Kathaleen St. Jude McCormick were to conclude that Musk was responsible for the funding failure after his months of bashing the company, he could potentially face a court order to sue. Morgan Stanley to provide the funds or close the deal without it.
Debt financing aside, Musk might also need a bit more cash to fund his equity portion of the deal, which could require him to sell more Tesla.
(TSLA) shares, Lipton said, and he will have to wait a few days to be able to do so. You’re here
(TSLA) is due to report quarterly earnings on Oct. 19, and executives are generally instructed not to sell shares in the days leading up to an earnings report. (Musk also presumably has a large stake in SpaceX, but since the company isn’t publicly traded, it’s unclear what it would take to liquidate them on short notice.)
Another cause for delay: Musk could also be trying to make sure his financial partners are still on board despite all the upheaval he’s created for Twitter over the past few months. Geis said these investors may be asking the question right now, “How do I balance the risk of [participating in] this agreement against the risk of losing my relationship with Musk [if I don’t]?”