• EWC Community

Despite Attempting to Walk Away, Elon Musk Might Have to Buy Twitter



By: Andrew Lu


Elon Musk made a deal with Twitter executives to buy the platform for $44 billion. But despite having a net worth of $218 billion and being the richest man ever, Mr. Musk doesn’t have $44 billion in cash to spare.


Actually, Mr. Musk took a $25.5 billion loan from Morgan Stanley, Bank of America, and Barclays. Most of Mr. Musk’s money is in his Tesla stocks. Unfortunately, these stocks aren’t liquefiable.


Mr. Musk had wonderful dreams about Twitter, announcing that he’d improve the algorithm, fend off bot accounts, and add innovative features. Multiple banks and financial backers supported Mr. Musk’s venture.


But recently, Mr. Musk terminated the deal, announcing that he would not buy Twitter anymore. Twitter threw a tantrum and sued Mr. Musk, hoping to get some money in the process. Now the question is, will Mr. Musk have to buy Twitter, or will he be able to bail out?

Mr. Musk claimed that Twitter has refused – or failed – to provide enough data about the number of spam accounts on Twitter. Twitter retorted, saying that Mr. Musk is making excuses because he doesn’t want to take financial responsibility. His backing partners are stuck now.

Twitter argues that Mr. Musk signed the agreement. Twitter also mentioned that his financial backers signed the necessary contracts – so they can’t terminate the deal.


“They’ve signed commitment letters, so they’re essentially committed,” said Adam Badawi, a law professor at the University of California at Berkeley (UC Berkeley). “Other companies wouldn’t want to work with them if they reneged,” he said. The banks have got to take the deal because they can’t break their reputations.


For the banks, they could get away by announcing that the deal is a lot riskier than when they signed it. But unfortunately, for Mr. Musk, he’d have to find other financial backers and still finish the deal if Twitter succeeds in the lawsuit.


So why haven’t the banks tried to bail a long time ago? Most people don’t believe Twitter will be able to make Mr. Musk pay. In fact, the likely outcome is that the judge makes Twitter and Musk compromise, and Mr. Musk will have to pay a hefty fine for causing so much trouble for Twitter. After that, the banks could walk away without paying anything huge.


Also, the banks might want to stay on Mr. Musk's side until the end. Mr. Musk is still the richest man in the world, so he’d be still borrowing money no matter how the Twitter fiasco ends. So Mr. Musk will still borrow from them if they maintain good relationships. “You want to keep his business if you’re a bank because I think it’s pretty lucrative,” said Carl Tobias, a law professor at the University of Richmond.


On Twitter’s side, forcing Mr. Musk to buy Twitter will take tons of effort but will benefit the company. When the deal was struck, Mr. Musk agreed to buy it for $54 per share. Now Twitter is trading at $36 per share.


The stock would plummet even more if they let Mr. Musk walk away completely. Also, most of Twitter’s employees don’t want the company sold to Musk.


One of Twitter’s founders, Ev Williams, said that if he were still on the board, he’d “be asking if we can just let this whole ugly episode blow over.”

1 view0 comments