(C) Center for Economic and Policy Research
This unaltered story was originally published on CEPR.NET
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Biden’s Student Loan Dilemma [1]

['Andrew Ross Sorkin', 'Jason Karaian', 'Vivian Giang', 'Stephen Gandel', 'Lauren Hirsch', 'Ephrat Livni', 'Jenny Gross', 'Anna Schaverien']

Date: 2022-04-27 00:00:00

What Twitter’s deal documents tell us

Elon Musk’s $44 billion offer to buy Twitter is now in writing. Twitter’s board approved the transaction this week, but the deal won’t be final until it’s put to a shareholder vote. Twitter has taken the first step in that process, filing its merger document with the S.E.C. Here are a few things that caught our eye:

A $1 billion breakup fee. Twitter would have to pay Musk $1 billion if it enters into a deal with another bidder, and Musk would have to pay Twitter the same if financing for the deal falls apart. The fee, while large, is roughly 2.5 percent of the deal’s value, which is standard. In fact, given Musk’s unpredictability, many deal makers expected a larger termination fee. The smaller fee is perhaps a sign of the leverage Musk had.

Musk can tweet about the deal. But, according to the merger agreement, he can’t disparage Twitter or any of its employees. Is it an issue that Musk has already criticized Twitter employees? Disparage is “in the eye of the beholder,” Eleazer Klein of the law firm Schulte Roth & Zabel, told DealBook. “The only way that’s going to really play out is if someone wants to go to court and fight over it,” he said. “And what are they going to do? They’re going to terminate the agreement if he goes a little bit too close to the line?”

“Elon Musk” doesn’t count as a risk to the deal. It’s typical for deals to detail if there are unusual circumstances that would allow one of the parties to walk away without having to pay a breakup fee. Twitter’s merger deal, though, specifies at least one instance in which Musk wouldn’t be able to do that. According to the document, if Twitter loses all or most of its users before the deal “by reason of the identity of Elon Musk,” there is no backing out. (As the saying goes: You break it, you buy it.) Indeed, the day Twitter announced its agreement with Musk, it saw a lot of user churn.

The deal has an Oct. 24 “drop-dead date,” meaning both sides could walk away if a deal hasn’t closed by then. If the deal is still awaiting regulatory approval, Musk and Twitter would have another six months to close it. U.S. regulators may examine Musk’s purchase of Twitter, but they are unlikely to sue to block it because it is not an example of a company buying a competitor. The deal may face tougher scrutiny in Europe, though, where officials warned yesterday that Twitter under Musk’s ownership would have to abide by the E.U.’s new Digital Services Act, which requires social media companies to police content more aggressively.

Further reading:

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[1] Url: https://www.nytimes.com/2022/04/27/business/dealbook/bidens-student-loans.html

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