Elon Musk and his bankers have until October 28 to complete the Twitter deal he fought to give up

Elon Musk is running out of ways to escape his initial $44 billion deal to buy Twitter Inc.

The world’s richest man, who rushed to acquire the social network in April and then abruptly wandered off the deal, has spent months trying to get out of the bond completely. In recent weeks, the two sides discussed a price about $4 lower than the $54.20 per share deal, but couldn’t agree on additional terms, people say. close to the file.

On October 3, Musk exerted public pressure by formally offering to repurchase the company at the original price, in an effort to avoid a fight on October 17 in Delaware Chancery Court. Twitter shares soared as investors sensed the drama was nearly over. But the company’s attorneys, suspicious of the terms of Musk’s letter, including the stipulation that Twitter drop his lawsuit, called it “an invitation to further mischief.”

“Rebound!” Musk tweeted.

Behind the scenes, Twitter lawyers rushed to verify Musk’s renewed affinity for the deal, checking to see if he had actually asked lenders for the money they committed earlier (one bank said that he hadn’t, says Twitter). Those same big banks tried to account for potential losses on the months-old terms of the deal, while Twitter employees, still in limbo, turned to memes and gallows humor to get through. the week.

On the night of October 6, the billionaire finally got what he wanted: a postponement of the trial. There, a judge would have considered all of his reasons for pulling out of the deal in full view of the public and the media. In return, Musk was given a new court-ordered deadline of October 28 to fulfill his promises. If he and Twitter don’t close the deal by then, he’ll likely be on the witness stand in November.

The change buys Musk time. And if he really doesn’t want to go to court, that also brings Twitter shareholders closer to a payday. “At $54.20 cash sale price at closing this year, it’s good to be long TWTR! “celebrated Kevin Stadtler, managing director of Twitter investor Stadtler Capital, in an e-mail.

According to Gene Munster, managing partner at Loup Ventures, there’s still “a 10% chance Musk will try a smart move to get out of the deal.” A person familiar with his strategy says one possible scenario still involves Musk getting the deal at a lower price. But Musk is showing signs that he’s resigned to owning the product; his public comment has gone from criticizing the social network to talking about its future under its stewardship, as part of an “everything app” called X, with “very fast” product development, according to his tweets this week.

Now one of the parts must move. Musk wants to add that the deal should be conditional on him receiving $13 billion in debt funding, but the original contract didn’t contain that stipulation, so Twitter isn’t interested in allowing it. Musk is also seeking to reserve his rights to sue for fraud on the grounds that platform executives misled him and other investors about the number of spam and bot accounts. among its more than 230 million users. Again, based on Musk’s track record, the company has little reason to agree.

Inside Twitter, employees have spent the week debating the real agenda behind Musk’s latest U-turn. Many believe it’s a game of time, with Musk aware he was unlikely to win at trial and looking for options that would allow him to step down at a later date. Some ex-Twitter staffers have expressed relief to come out ahead of the whirlwind of Musk’s public statements, as well as all the distraction and stress his eventual ownership would likely bring.

Those who remain are preparing for cuts. If the deal closes very soon, a number of Twitter employees fear they will be fired before they have a chance to acquire their restricted stock, a milestone slated for early November, people familiar with the matter said. Employees are particularly affected in departments related to policy, communications and marketing; Musk said in a tweet that in his version of Twitter, “software engineering, operations and server design will dominate the roost.”

If the acquisition goes ahead, Morgan Stanley-led banks also stand to lose – potentially more than $500 million, according to Bloomberg calculations. With yields at multi-year highs and the new closing date fast approaching, financial institutions will likely have to directly fund debt they might otherwise sell to investors.

Yet one of Musk’s bankers complained privately in a call with a reporter that he was fed up with the whole saga and hoped it would end soon. A second banker was puzzled, saying he hadn’t thought about the deal in months as general market conditions deteriorated. Others were harder to reach, saying they had been advised not to speak, given the fragility of the situation.

Although they are closing in on an agreement, the talks have remained contentious. “Twitter offered Mr. Musk billions off the transaction price. Mr. Musk refused because Twitter tried to impose some self-serving conditions on the deal. Any statement to the contrary is a lie,” Musk’s attorney, Alex Spiro of Quinn Emanuel Urquhart & Sullivan LLP, said in a statement Oct. 6. While there were talks between the two sides about a price cut, Twitter insisted the offer would stay above $50 per share, according to people familiar with the matter. Talks since then have focused on preventing Musk from finding a way out of the deal, the people said.

Musk has indicated, via filings and delays, that he is in no rush to be in front of a judge. The billionaire recently had hundreds of personal text messages made public as part of the legal process, revealing negotiations with his business contacts and conversations with friends. Any further court moves could mean more private cases are exposed.

The Tesla Inc. CEO’s legal team may already have had a feeling the case wasn’t going well, as Judge Kathaleen St. J. McCormick repeatedly sided with Twitter in rulings pre-trial, according to a person familiar. Even with the belated emergence of a whistleblower on Twitter who alleged executives were unavailable on security and bot issues, there were concerns that Musk’s side would not be able to prove a material adverse effect, the legal standard required to terminate the contract.

Just days before he relaunched his $54.20 offer, Musk’s deposition was canceled and postponed multiple times — first because of the location (Delaware) and then, later, because the attorney who was supposed to The interrogator had been exposed to Covid-19, according to people familiar with the case and court records. Musk’s attorneys say they weren’t told about the exposure until they were already on their way to San Francisco, presumably for Twitter CEO Parag Agrawal’s deposition, which was scheduled for the next morning. Agrawal also postponed his questioning until October 3.

For his part, Musk says in court documents that he has “worked diligently, cooperatively and in good faith with the financing banks to prepare for closing,” but that it will take time as the parties “work through the process.” complex”. to draft documents, provide security for part of the debt financing and “finalize the financing arrangements”. He said finance bank lawyers estimated they would need until Oct. 28 to fund the loans. He also said the lawyers had indicated that each of their clients were “ready to meet their obligations” under their debt covenants.

Twitter is not buying it. In its Oct. 6 response, the company said a banker involved in the debt financing testified that day that Musk had not yet sent them a loan notice and had not otherwise communicated that he intended to complete the deal. The banker also said that “the main task needed to get the deal done – commemorating the debt financing – could have happened in July, but didn’t because Mr. Musk was pretending to end the deal.” , according to Twitter.

There is now an official deadline, according to the judge: 5 p.m. on October 28.

Investor Stadtler, whose company has $80 million under management, said he’s happy with the result so far, but he doesn’t want Musk using the next version of Twitter. He “carelessly entered into a merger agreement and overpaid for the asset,” Stadtler said. “One of Musk’s advisors should have used the most important word for investing: no.”

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