Top News 4U
Stock Market, Currency and Financial News

Elon Musk’s deal to buy Twitter hinges on the money

0 3

On Thursday, a judge agreed to temporarily pause the legal proceedings concerning $44 billion acquisition deal between Elon Musk’s Twitter and the company itself. This gave both parties two months to close their deal or face another trial after the countdown ended.

Elon Musk’s upcoming gift need to be financed by him before anyone can wait on it.

In order to complete this massive acquisition, the world’s wealthiest man needed financial assistance. In April of 2018, Elon Musk revealed that he was securing $46.5 billion in financing for the deal. Morgan Stanley provided one debt commitment letter for $13 billion, and another for $12.5 billion was written by an anonymous financial institution. Musk also personally invested $21 billion in equity to fund the purchase, which was later increased to $27 billion by investors such as Oracle founder Larry Ellison and Binance, a cryptocurrency firm.

Musk seems to have a disagreement with Twitter over the terms of his financial backing.

Earlier Thursday, Musk’s team released a statement announcing that the ligation was unnecessary because the deal already closed on the terms originally agreed upon. Musk’s banks were “working cooperatively” to fund the ligation, according to their statement.

Twitter expressed skepticism about Musk’s efforts to exit the deal after months of uncertainty and resistance. They also worried that a bank insider had testified Thursday morning that Musk hadn’t notified them of plans to borrow money or close the deal. In a separate filing, Twitter expressed concerns that Musk had yet to send a borrowing notice and hadn’t otherwise communicated his intentions to the banks. They urged Musk to close the deal by next week.

Since the beginning of his deal with Twitter, many legal experts have been certain that Musk intends to close the deal this time instead of putting it on hold. They believe that he came to this conclusion after seeing the writing on the wall during his upcoming trial. Many believe that he realized that he would likely have to buy Twitter if he lost at trial. This would result in even more monetary costs for his company and a takeover of Twitter by Musk himself— which many people believe is a lost cause.

Musk has a specific process he must follow when closing a deal, according to Ann Lipton, an associate professor of business law at the Tulane University Law School. Because of this, Musk likely won’t close the deal in the next two weeks, she said. There are several likely reasons for this, including Musk’s need to finalize financial agreements he previously announced.

Elon Musk’s relationship with Morgan Stanley goes back a decade. Because of this, Musk can be considered a favor to the bank by marketing the company’s debt to other investors and asking them to close the deal before he takes their money. Elon Musk is not required to do that, but it would do Morgan Stanley a big favor if he did.

Many people have questioned whether Morgan Stanley and other banks financing the deal can back out now due to the perceived diminishing value of Twitter. Musk spent months publicly criticizing Twitter’s flaws as he promoted his alternative digital advertising platform. As a result, many believe Twitter is no longer as valuable as it once was.

The bank currently faces legal repercussions if it attempts to back out of its commitment now.

According to business school professor George Geis, the only way they could get out of the contract was to claim that Twitter’s material changes caused them to lose money on the deal.

Musk’s debt financing could fail, prompting the deal to fall through. According to the merger agreement, Musk would receive a $1 billion breakup payment from Twitter if this were to happen. Musk also risks getting sued by Morgan Stanley if the chancellor of Delaware Chancery Court, Kathaleen St. Jude McCormick, finds that he is at fault for his financing failing. If McCormick found that Musk caused the failure of his financing and tarnished the company’s reputation in the process, he could be legally obligated to sue Morgan Stanley to pay off the debt or close the deal without it.

Elon Musk’s relationships with his equity partners may affect the time it takes to complete a deal. In order to balance this risk, some of Musk’s investors may currently be asking themselves the question: “How should I balance the risk of [participating in] this deal versus the risk of losing my relationship with Musk?”

Musk’s mission to secure his company’s investors from Twitter-related disruption has caused a delay in the process. According to one source, Musk is purposely delaying the deal so that his investors can reassess their options. This is because Musk realizes that they may be concerned about the risk of joining his deal versus the risk of losing their relationship with Musk by staying on the sidelines.

You might also like
Leave a comment

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More