The fate of Elon Musk’s deal to buy Twitter now comes down to the money


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The countdown is now on for Elon Musk and Twitter to complete their $44 billion acquisition deal by Oct. 28 or be forced to prepare for a trial again after a judge on Thursday agreed to stay the court case.

What everyone is waiting for now: Musk must actually have the money to hand over.

Even the richest man in the world needs a little help to make a purchase of this magnitude. In April, Musk announced that he had provided $46.5 billion in funding for the deal, including two commitment letters from Morgan Stanley and other unnamed financial institutions (one for $13 billion and one for 12, $5 billion, the latter later being reduced to $6.25). Billion). Musk himself has also pledged around $21 billion in equity to fund the deal and later raised an additional $7 billion in equity from investors including Oracle founder Larry Ellison and cryptocurrency firm Binance.

Much of the bone of contention between Musk and Twitter (TWTR) now seems to be uncertainty over the status of those funding agreements.

Musk’s team said in a filing earlier Thursday that it was not necessary to proceed with the ligation because he was committed to completing the deal on the terms originally agreed and the banks, which had pledged debt financing to help him to help with pay, are “working cooperatively to fund completion.”

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Twitter – skeptical after months of trying to get Musk out of the deal and also wanting to keep the pressure of a lawsuit above him – declined to suspend the proceedings. In a separate filing, concerns were raised that an unnamed representative of one of the banks testified Thursday morning that Musk had not yet sent a credit notice and “did not otherwise advise them that he intended to complete the transaction, let alone any timeline.” Twitter also said Musk should finalize the deal by next week.

Many legal experts believe Musk genuinely plans to close the deal this time, most certainly since he first said in May the deal was “on hold” and moved to terminating the agreement in July. Many following the case think Musk saw the writing on the wall, which he would likely lose in the process and be forced to buy Twitter anyway — spend more money and move on to the company he would eventually have to take over damage.

“I think Musk has intentions of closing 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, have to do with the time it takes Musk to bring all previously announced funding arrangements together to close the deal.

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Lipton says Musk is likely trying to help Morgan Stanley market the debt to other investors before telling them to give him the money to close the deal. While Musk isn’t obligated to do so, it would do a bank he’s worked with for more than a decade a favor, given the tougher economic environment today than it was when the agreements began.

Some have speculated that Morgan Stanley and the other banks offering leverage might try to walk away from the deal now that Twitter is arguably even less valuable now than it was when the deal first went through, after Musk spent months making claims about his mistakes and the consequences of broader market downturns on social media and digital advertising.

But the bank could face legal ramifications if it tries to step back from its involvement now.

“The only way they could get out of it is by claiming a material adverse effect and that Twitter has changed so much since they agreed to the deal that they no longer want to fund the deal,” George said Geis, Professor of Strategy at UCLA Anderson School of Management.

Even if the banks tried to back down, Musk may not automatically be off the hook. According to the merger agreement, Musk could theoretically go out of business with a $1 billion severance payment to Twitter if his debt financing fails. However, should Delaware Chancery Court Chancellor Kathaleen St. Jude McCormick determine that Musk was at fault for the funding after months of disparaging the company, he could potentially face a court order banning Morgan Stanley from providing the funds or the Sue closing the deal without it.

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Debt financing aside, Musk may need some more cash to fund his equity stake in the deal, which could force him to sell more Tesla (TSLA) stock, Lipton said, and he’ll have to wait a few days to do so. Tesla (TSLA) is expected to report quarterly earnings on Oct. 19, and executives are typically obligated 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 not clear what it would take to liquidate them in the short term.)

Another reason for some delays: Musk could also be trying to ensure his equity partners are still on board, despite all the upheaval he’s caused for Twitter over the past few months. Geis said these investors may be asking themselves the question right now, “How am I supposed to balance the risk? [participating in] this deal at the risk of losing my relationship with Musk [if I don’t]?”

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