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Musk & Twitter: The Second Act

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  1. #11

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    Quote Originally Posted by shri:
    And he does use Twitter...
    Oversensitive much? Lol

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  3. #13

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    Quote Originally Posted by GentleGeorge:
    Oversensitive much? Lol
    Nah... just have a problem with people channeling their inner trumpy or musky personas.
    BCD likes this.

  4. #14

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    Quote Originally Posted by traineeinvestor:
    Will just mean more money for the lawyers, little anyone can do to enforce this in real life if Musk changes his mind.

  5. #15

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    Quote Originally Posted by shri:
    Nah... just have a problem with people channeling their inner trumpy or musky personas.
    Except this time it's not Trump or Musk saying it but... Bloomberg's Matt Levine

    https://www.bloomberg.com/opinion/ar...elon-closes-in

    https://www.bloomberg.com/opinion/ar...-board-gave-up

    It is an exaggeration, but a useful one, to say that Twitter’s board of directors is made up of 11 people who don’t use Twitter and don’t own any Twitter stock. Actually one member of the board — though he is scheduled to step down next month — is Jack Dorsey, a founder of Twitter, who (1) owns 2.4% of the company, (2) uses the product and (3) does not seem to get along with the other directors. The other 10 directors all own a little stock — about 0.2% of the company, total, among them — and I’m sure they all have Twitter accounts and tweet occasionally.

  6. #16
    Quote Originally Posted by TheBrit:
    Will just mean more money for the lawyers, little anyone can do to enforce this in real life if Musk changes his mind.
    I don't know anything about US takeover legislation, but I'm assuming from this that it's different from HK/UK where it is mandatory to proceed with an offer once it has been announced (unless non-subjective conditions included in the original announcement are not satisfied)?

  7. #17

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    Quote Originally Posted by traineeinvestor:
    I don't know anything about US takeover legislation, but I'm assuming from this that it's different from HK/UK where it is mandatory to proceed with an offer once it has been announced (unless non-subjective conditions included in the original announcement are not satisfied)?
    Here's some more info:

    Musk and Twitter agreed to a so-called reverse termination fee of $1 billion when the two sides reached a deal last month. Still, the breakup fee isn’t an option payment that allows Musk to bail without consequence.

    A reverse breakup fee paid from a buyer to a target applies when there is an outside reason a deal can’t close, such as regulatory intermediation or third-party financing concerns. A buyer can also walk if there’s fraud, assuming the discovery of incorrect information has a so-called “material adverse effect.” A market dip, like the current sell-off that has caused Twitter to lose more than $9 billion in market cap, wouldn’t count as a valid reason for Musk to cut loose — breakup fee or no breakup fee — according to a senior M&A lawyer familiar with the matter.
    https://www.cnbc.com/2022/05/13/elon...1-billion.html

    from the NYT ...

    He added that it was a “material adverse misstatement” if Twitter said it has less than 5 percent of fake or spam accounts but the figure is actually significantly more.

    “Material adverse change” clauses are used by buyers to get out of or renegotiate deals if there has been serious harm to a business. But such charges rarely prevail in court. Twitter’s bot count is unlikely to qualify as a material adverse statement, lawyers said, since Twitter has publicly disclosed similar figures quarterly and there would be no clear change to evaluate. And Twitter also cautions in its regulatory filings its bot estimates may be “higher” than it estimates.

    Twitter’s deal contract has eight pages of “representations”: effectively promises about the state of the company at the time of the merger, though none pertain directly to its count of bots.
    https://www.nytimes.com/2022/05/17/b...k-twitter.html

    Can twitter afford a lengthy lawsuit where it would have to prove its bot count and put it on record and also prove that there would be no impact to future earnings because of this new bot count?
    traineeinvestor likes this.

  8. #18

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    Quote Originally Posted by shri:
    Here's some more info:



    https://www.cnbc.com/2022/05/13/elon...1-billion.html

    from the NYT ...



    https://www.nytimes.com/2022/05/17/b...k-twitter.html

    Can twitter afford a lengthy lawsuit where it would have to prove its bot count and put it on record and also prove that there would be no impact to future earnings because of this new bot count?
    Bloomberg has a different take on it, and a quite different assessment to the debate around specific performance to the previous analysis I had read (which concluded it was difficult for twitter board to use)

    (Bloomberg Intelligence) -- Twitter is in a strong legal position if Elon Musk attempts to walk away from his April 25 Twitter M&A agreement. If litigation arises, we give Twitter a 60% chance to win a court order forcing Musk to complete the deal. We doubt that Musk's claims about fake accounts bolsters his legal case. Even what's perhaps his greatest leverage -- the threat of an extended court fight -- looks shaky because this court acts fast. (05/18/22)


    1. Specific Performance Gives Twitter Leverage Return to Top

    Delaware Court Could Force Musk to Close
    Source: MARB
    Data
    Musk probably can't walk away from the deal simply by paying its $1 billion termination fee because he also agreed to a "specific performance" clause. It says that Twitter shall be entitled to a court order to "consummate the closing" if the deal's debt financing has been funded, and Twitter has satisfied other conditions that don't appear to be major hurdles. The agreement also says a court could force Musk to fund the deal's equity financing. The Delaware Chancery Court that would hear this case granted specific performance in favor of a seller in a 2001 case involving Tysons and IBP. In 2008, the court again granted specific performance to force Hexion to perform obligations under a merger agreement. (05/18/22)


    2. Bots Probably Don’t Give Musk an Out Return to Top

    Twitter Daily Active Users (DAUs)
    Source: MODL US TWTR Equity
    Data
    Elon Musk's Twitter posting that the deal "cannot move forward" until Twitter proves that less than 5% of accounts are inauthentic doesn't track his agreement and probably won't give him an out. Even though Twitter did represent that its SEC filings were accurate, Musk can only avoid consummating the deal if a Twitter misrepresentation on that issue has a so-called material adverse effect. That's highly unlikely. Musk would have a "heavy burden" to prove the issue is an "unknown event" that "substantially threaten[s] the overall earnings potential" of Twitter in a "durationally significant manner." Twitter had disclosed the difficulty in measuring accounts for years. Even if there were a significant misrepresentation, Musk may struggle to show that it threatens the company's long-term earnings potential. (05/18/22)


    3. Musk’s Key Leverage – Delay – Undercut by Court’s Unusual Speed Return to Top

    Chancellor Kathaleen McCormick Leads Key Court
    Source: Bloomberg Intelligence
    Data
    Though Musk's greatest theoretical leverage may be to threaten to tie the issue up in endless litigation, the Delaware Chancery Court works so fast that we're skeptical it would be a major problem for Twitter. We'd expect the court to grant a motion to expedite the suit, putting the case on a fast track for discovery and a bench trial. After a lawsuit is filed, we believe the court could finish trial and rule within 4-6 months. An expedited 2008 case involving Hexion in which the court ordered specific performance was filed in mid-June and decided before October
    shri likes this.

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