So now we have a deadline for Elon Musk to put up or shut up in his tortuous $US44 billion bid for Twitter.
The Delaware judge hearing Twitter’s action against Musk to compel him to carry through with his $US54.20 bid has ordered a halt to Twitter’s action until 5pm October 28 – to permit the billionaire to close his deal, according to the court filing.
That’s a win of sorts for Musk as Twitter had objected to his legal team suggesting October 28 as a new date instead of the originally scheduled October 17.
In the hearing Thursday, Musk’s attorneys said a close would be possible “on or around October 28.” Twitter had opposed Musk’s motion, calling it “an invitation to further mischief and delay,” and asked for a settlement of the bid by October 10. That was denied and Musk now has three weeks to get his ducks in line and either complete the bid, or try to tap dance his way out of it.
Should Musk opt for the latter to avoid a deal, the judge made it clear she will set a date in November for the trial to start.
Two days after news of his about face emerged, the Wall Street Journal reported that Musk had been talking to Twitter about cutting the $US54.20 a share office price – without success.
The paper reported that the price-cut talks had ended before Musk caught Twitter off-guard by sending his company’s lawyers a two-sentence letter detailing his intentions.
That sounds very much like a negotiating tactic, not finality.
Other reports claimed Musk was close to getting a price cut, but no one has substantiated that.
Now Musk and Twitter will have to hash out the details of his purchase proposal – Twitter has its lawyers on standby in Delaware to rush to court to get an order forcing Musk to complete.
Musk’s volte face did get him out of two days of being grilled in deposition taking by Twitter’s lawyers and now there’s an 11-day delay to him being forced to complete the bid.
That deposition-taking, a key part of any trial in the US seems to have been a key driver in focusing Musk’s attention on the trial and its potential to damage his image and reputation.
His lawyers’ letter and offer to complete the deal this week has (for the time being) halted that deposition which had the potential to embarrass him it the public arena in the court hearing.
As Eric Talley, professor at Columbia Law School told the Financial Times: “This was going to be one of the most unpleasant depositions … It was clear that the discovery record has some damaging stuff.”
Musk was scheduled to be deposed by a pack of America’s top lawyers representing Twitter. For months, they’ve been tightening the screws on the mercurial EV billionaire.
Last week, Twitter released thousands text messages by Musk including hundreds sent to his network of billionaires, such as Oracle’s Larry Ellison and venture capitalist Marc Andreessen (Netscape) which the Financial Times said underscored how embarrassing the fight could get if it escalated.
Some of these ‘mates’ have agreed to fund $US7.1 billion of the bid – can they now pull out and give Musk an out? In his letter on Monday to Twitter he made his completing the bid “pending receipt of the proceeds of the debt financing.” That is still to happen, to the best of our knowledge.
As Reuters explained this week there’s now a group of some of the biggest banks in the world staring down hundreds of millions of dollars of losses from the $US12.5 billion they’ve agreed to finance.
That’s because having put up the money, the banks would package up the loan into different types of securities and sell them off to raise the cash to pay themselves back and their fat fees.
The rapid rise in interest rates, courtesy of the Fed has seen that little wheeze end for banks who are reported to have dropped one $US3.9 billion financing deal for a takeover and taken huge losses of half a billion dollars or more in selling a takeover loan last month.
Perhaps that’s why Apollo Capital Management is no longer in talks with Musk to pony up $US1 billion towards financing the Twitter deal, as Reuters reported.
“From the banks’ perspective, this is less than ideal,” Wedbush Securities analyst Dan Ives told Reuters. “The banks have their backs to the wall – they have no choice but to finance the deal.”
Could this be the first of a number of withdrawals by bankers no longer wanting to generate huge losses supporting Musk’s ambitions?
If Musk claims he can’t get the money, he will use that to try and walk away without being called on to pay the $US1 billion break fee.
If Musk does that, Twitter’s value could halve from the $US44 billion in Musk’s bid, badly damaging shareholders who are the innocents in this case (ironically, which would include Musk with his 9.6% stake).
Andrew Jennings, a professor at Brooklyn Law School told the Financial Times that he expected Twitter “will likely insist on having an ironclad agreement to close” such as a stipulation judgment — a formal court order that requires one party to pay another — or “some other mechanism that puts the court’s contempt power behind closing the deal”.
