Is Elon Musk Actually Going to Buy Twitter? Can He Just Walk Away?
Here are Musk’s options should he try to abandon the $61 billion deal.
3 min
There are signs Elon Musk may be getting cold feet a few weeks after he agreed to buy Twitter Inc. for approx. $61 billion.
The billionaire Tesla Inc. chief executive recently tweeted that the deal is “on hold” until he gets more information about the portion of the social-media platform’s users that are spam accounts. Twitter has for years said in filings that it estimates they represent less than 5% of its daily active users, though has cautioned the number could be higher.
This is all happening as technology shares—including those of Tesla, which Mr. Musk is relying on to fund the deal—have been under pressure. Twitter’s board, meanwhile, says it intends to enforce the agreement, which calls for him to pay US$54.20 a share.
Here’s what to know about how things could play out.
Can either side walk away at any time?
Not easily. Both sides signed a merger agreement, a detailed document stipulating exactly what each will do to ensure the agreed-upon deal closes, and what legal rights each has if the other doesn’t hold up its end of the bargain. It is similar to going under contract on a house.
In this case, Mr. Musk was motivated to quickly negotiate a deal, and in doing so, agreed to a contract with several seller-friendly components. For example, he waived the detailed due diligence that buyers typically perform on targets (think of it like skipping a home inspection), and gave Twitter the right to sue him to follow through with the deal, a legal clause known as “specific performance.”
Both sides also agreed to pay each other a US$1 billion breakup fee if they cause the deal not to happen for certain reasons, but specific scenarios must unfold for those to become relevant. Also called termination fees, the penalties are meant to deter parties from breaking agreements and address the inconvenience and cost of a failed deal.
Can Mr. Musk just pay Twitter the $1 billion breakup fee to get out of the deal?
Not necessarily. There are three clear scenarios in which this could happen, and possibly more. If regulators try to block the deal or the debt financing falls through, he would likely have an out. The third is if he can show Twitter has significantly changed for the worse since the deal was agreed upon, under a concept known as a “material adverse effect.”
If Mr. Musk believes Twitter’s accounting of spam accounts was inaccurate when he signed the deal, his lawyers could attempt to litigate that issue in various ways, including as a material adverse effect, or possibly by alleging that Twitter misrepresented information in its filings. It is unclear whether they would succeed, though it could open the door to settlement discussions.
What will Twitter do?
Twitter’s board feels strongly that the two sides had an agreement that remains in effect and is the best option for shareholders. “We intend to close the transaction and enforce the merger agreement,” it said.
For that reason, Twitter appears willing to sue for specific performance if it comes to that, meaning it could try to force Mr. Musk to follow through with the deal or provide what it sees as fair compensation. In practice, that can be difficult but often opens the door to settlement discussions.
The agreement between the two sides also requires Mr. Musk to avoid disparaging Twitter and its representatives on the platform and his recent tweets could have crossed that line. While Twitter could challenge the behaviour, it appears more focused at the moment on closing the deal rather than launching relatively minor litigation that could run the risk of complicating things further.
What is going to happen?
It is too early to say. The deal could still happen, and could close as soon as this winter if both sides keep moving forward. Another possible outcome is that the two sides negotiate a settlement, especially if it becomes clear that Mr. Musk is intent on getting out of the deal or trying to lower the price.
Even when contract terms are clearly spelled out, more often than not deal clashes end in negotiated settlements that can include a price cut or one-time payments.
In 2020, luxury-goods conglomerate LVMH Moët Hennessy Louis Vuitton SE tried to back out of a deal to buy Tiffany & Co. for US$16.2 billion after the pandemic hurt demand for high-end jewellery. Tiffany sued to enforce the agreement and LVMH countersued, arguing the business had been so deeply damaged that their original agreement was no longer valid.
The two sides later agreed to cut the price by a relatively modest US$430 million and settle related litigation.
Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: May 18, 2022.
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3 min
Lost for decades, an acoustic guitar John Lennon used at the height of the Beatles’ fame is going up for auction after being found in the attic of a home in the British countryside.
The 1965 Framus Hootenanny is arguably one of the most historically important guitars in the history of the Beatles, and was used on some of the group’s classic songs and played by Lennon in the movie Help! , released the same year.
The 12-string acoustic guitar will headline Julien’s Auctions Music Icons event on May 29 and 30 at the Hard Rock Cafe in New York, the auction house announced Tuesday morning in London.
Darren Julien, the firm’s co-founder and executive director, expects the Framus to exceed its presale estimate of between US$600,000 and US$800,000 and says it could set a new record for the highest-selling Beatles guitar, a record his auction house set nearly a decade ago.
Rupert Hitchcox/Julien’s auctions
“Julien’s sold a John Lennon [Gibson J-160E] guitar in 2015 for US$2.4 million, and because this, historically speaking, is a more significant guitar, our expectation is that this guitar—played by John Lennon and George Harrison on the Help! album and other recordings—will be in the top five most expensive guitars ever sold at auction,” Julien says. “It’s likely the last chance for someone to buy and personally own an iconic John Lennon/George Harrison guitar.”
While equating its discovery to that of a “lost Rembrandt or Picasso,” Julien believes this is the greatest find of a Beatles guitar since Paul McCartney ’s lost 1961 Höfner bass, which was returned to him in February after it had been stolen in 1972.
The rediscovered Framus was famously seen in the 1965 film Help! , and was used in recording sessions for classics such as “You’ve Got To Hide Your Love Away,” “It’s Only Love” and “I’ve Just Seen A Face.” It was also played by George Harrison on the rhythm track for “Norwegian Wood” on the 1966 album Rubber Soul .
According to the auction house, by the late-1960s the guitar was in the possession of Gordon Waller of the British pop duo Peter & Gordon, who later gave it to their road managers. The instrument was recently discovered in an attic in rural Britain where it sat forgotten and unplayed for more than 50 years. After finding the guitar in the midst of a move, the homeowners contacted Julien’s.
Along with co-founder Martin Nolan, Julien traveled to the U.K. and immediately recognised that it was the storied Help! guitar. While on the premises, they also discovered the original guitar case in the trash and rescued it. It’s an Australian-made Maton case that can be seen in photos taken of The Beatles in 1965 The sale of the guitar is accompanied by the case and a copy of the book The Beatles: Photographs From The Set of Help by Emilo Lari.
In addition to Lennon’s acoustic Gibson J-160E—which fetched three times its presale estimate—Julien’s has broken multiple Beatles records, including Ringo Starr’s Ludwig drum kit (which sold for US$2.2 million), the drumhead played on the Ed Sullivan Show (US$2.2 million), and a personal copy of the White Album , (US$790,000), all of which sold in 2015.
Julien’s also holds the record for the world’s most expensive guitar ever sold at auction: Kurt Cobain’s MTV Unplugged 1959 Martin D-18E acoustic electric guitar, which sold in 2020 for US$6 million.
More than 1,000 pieces of music memorabilia will also be part of the auction, including items used by the likes of AC/DC, Nirvana, Guns N’ Roses, Judas Priest, Heart, Queen, and Tupac Shakur.
Sartorial highlights include custom dresses worn by Tina Turner (Versace) and Amy Winehouse (Fendi), both of which are expected to sell for between US$4,000 and $6,000, and Michael Jackson’s stage-worn “Billie Jean” jacket from 1984’s Victory Tour (presale estimate: US$80,000 to $100,000).
Bidders will have the chance to buy items benefitting a pair of U.K. charities. Several collectibles from The Who and other British musicians will be sold to benefit the Teenage Cancer Trust, and an assortment of memorabilia—ranging from a Stella McCartney dress worn by Helen Mirren and an Armani jacket stage-worn by Phil Collins to artwork created and signed by Pierce Brosnan—will be offered to help fund the King’s Trust.
Rounding out the two-day auction is Randy Bachman’s collection of more than 200 museum-quality guitars. Known for his role in The Guess Who and Bachman-Turner Overdrive, the Canadian rock star used the instruments on hits such as “These Eyes,” “Takin’ Care of Business,” “You Ain’t Seen Nothin’ Yet,” and “American Woman.”
The public can view the Help! guitar and other auction highlights at Hard Rock Cafes in London (April 23-29) and New York City (May 22-28).
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