Elon Musk, famously known as the world’s richest man, announced his intent to purchase Twitter for $44 billion in April. With auspicious propositions varying from new features to fending off spam bots, Musk garnered support from a consortium of banks who agreed to loan him over half of Twitter’s jaw-dropping price tag. However, with a change of heart from Musk, the state of affairs has become far more complicated.
Although Musk’s estimated net worth is $221 billion, even he doesn’t have $44 billion in cash lying around. To compensate Twitter, Musk had planned to loan a total of $25.5 billion from various banks, including Morgan Stanley and Bank of America. The rest of the funding was to be subsidized from Musk’s own pocket and benefactors that hoped to become co-owners of Twitter.
Musk’s newfound realization that Twitter may have withheld information, combined with the company’s dimming business prospects, led to his attempt at terminating the deal — a decision met with harsh opposition. Twitter has moved forward by suing the billionaire, protesting that he is using excuses to renege a financial commitment he no longer wants. Meanwhile, Musk’s financial backers are trapped with no appealing way out.
Mutual legal agreements between Musk and the banks are one impediment desisting them from abandoning the deal. Another small yet significant reason is a fear of tainting their reputations. “They’ve signed commitment letters so they’re essentially committed,” said Adam Badawi, a law professor at the University of California at Berkeley. “Other companies wouldn’t want to work with them if they reneged,” he said.
Even without the banks’ loans, a judge could force Musk to find alternate sources of funding. The agreement he signed with Twitter includes a clause that requires him to fulfill the deal even if his debt financing falls through.
The Musk v. Twitter trial, set for October, will take place in Delaware Chancery Court. A predicted outcome is that Musk will be punished with a substantial fine but walk away without having to follow through with the deal. In that case, bank loaners will receive a fee from Musk without having to loan any money, which could be part of their motive for staying with him.
Will Musk win the court case against Twitter? Or will the billionaire be stuck with a company he wants no part of as banks face pressure to fund him? All will be determined from the actions of Twitter and Musk hereafter, and the world will be watching closely.
Link to article: https://s3.amazonaws.com/appforest_uf/f1658069937348x173603191368131070/Why%20Elon%20Musk%20can%E2%80%99t%20get%20out%20of%20buying%20Twitter%20even%20if%20his%20bankers%20bail%20-%20The%20Washington%20Post.pdf
Although Musk’s estimated net worth is $221 billion, even he doesn’t have $44 billion in cash lying around. To compensate Twitter, Musk had planned to loan a total of $25.5 billion from various banks, including Morgan Stanley and Bank of America. The rest of the funding was to be subsidized from Musk’s own pocket and benefactors that hoped to become co-owners of Twitter.
Musk’s newfound realization that Twitter may have withheld information, combined with the company’s dimming business prospects, led to his attempt at terminating the deal — a decision met with harsh opposition. Twitter has moved forward by suing the billionaire, protesting that he is using excuses to renege a financial commitment he no longer wants. Meanwhile, Musk’s financial backers are trapped with no appealing way out.
Mutual legal agreements between Musk and the banks are one impediment desisting them from abandoning the deal. Another small yet significant reason is a fear of tainting their reputations. “They’ve signed commitment letters so they’re essentially committed,” said Adam Badawi, a law professor at the University of California at Berkeley. “Other companies wouldn’t want to work with them if they reneged,” he said.
Even without the banks’ loans, a judge could force Musk to find alternate sources of funding. The agreement he signed with Twitter includes a clause that requires him to fulfill the deal even if his debt financing falls through.
The Musk v. Twitter trial, set for October, will take place in Delaware Chancery Court. A predicted outcome is that Musk will be punished with a substantial fine but walk away without having to follow through with the deal. In that case, bank loaners will receive a fee from Musk without having to loan any money, which could be part of their motive for staying with him.
Will Musk win the court case against Twitter? Or will the billionaire be stuck with a company he wants no part of as banks face pressure to fund him? All will be determined from the actions of Twitter and Musk hereafter, and the world will be watching closely.
Link to article: https://s3.amazonaws.com/appforest_uf/f1658069937348x173603191368131070/Why%20Elon%20Musk%20can%E2%80%99t%20get%20out%20of%20buying%20Twitter%20even%20if%20his%20bankers%20bail%20-%20The%20Washington%20Post.pdf
