The New York Times
After trying for months to get out of his $44 billion agreement to buy Twitter, Elon Musk told Twitter on Monday night that, actually, he wanted to do the deal — on exactly the original terms. His other big ask: Let’s put the litigation on hold. The two sides are now hashing out next steps, two weeks before they were set to face off in one of the biggest business confrontations of the century.
DealBook has been hitting the phones. Here is what we know — and want to know.
What we know:
- Things moved quickly. Twitter got the letter from Musk’s lawyers on Monday, and filed it yesterday morning with the Delaware Chancery Court presiding over the case. In an emergency confidential hearing, the judge instructed the two sides to figure it out and get back to her.
- Twitter is wary of pausing its litigation. It’s considering some options in its negotiations with Musk, including getting a court to oversee the deal’s closing (through a consent judgment), and charging Musk interest on any additional time it takes to close the deal.
What we don’t know:
- Why did Musk change his mind? Was it a reluctance to be deposed on Thursday and Friday? Concerns of further embarrassing his Silicon Valley and Wall Street friends, à la last week’s text message dump? Some piece of undisclosed bad news? Twitter, incidentally, felt very confident in its chances in the Delaware trial.
- Is he still hoping bank financing gives him an out? In his letter to Twitter, Musk says he will do the deal “pending receipt of the proceeds of the debt financing.” (Per the terms of the deal, if the bank financing falls apart, he needs to pay only a $1 billion breakup fee.) The banks have already committed to their $12.5 billion — as long as a deal happens by April 2023. Is Musk hoping they try to back out?
- Could Twitter stop Musk from using the banks as an out? One route would be to ask the judge to have the banks say in writing that they remain committed to funding the bid. The company could also ask Musk for a letter saying that he is unaware of any conditions that could impede the deal closing.
- Do the banks wish they had an out? The leveraged loan market, which Musk is partly relying upon, has weakened in recent months. If the Citrix deal is any indication, the banks lending to Musk, led by Morgan Stanley, could be sitting on big lending losses. Note: They cannot change the terms of their lending agreement.
- What are Larry Ellison, Ben Horowitz and Musk’s other friends going to do? It’s not clear whether any or all of the investors who agreed to chip in $7.1 billion to fund Musk’s deal have an out. (Musk had warned that some equity investors might not “come through.”) Would the text message headache or due diligence concerns give them cold feet?
- What are Musk’s plans for Twitter? With the ad market slumping, employee morale sinking and lax security accusations swirling, the company is in worse shape than it was in April. But Musk appears bullish again. “Buying Twitter is an accelerant to creating X, the everything app,” he said. If he goes through with it, “Musk’s Twitter will be a wild ride,” The Times’s Kevin Roose predicts.