A Delaware judge on Thursday granted Elon Musk’s request to delay a pending trial over his $44 billion Twitter offer after the world’s richest human rekindled efforts to close the deal earlier this week following a July declaration that he was backing out. Twitter tried unsuccessfully to block the trial delay and suggested Musk was up to “mischief” in a legal filing.
Is the $44 billion Twitter deal happening, or not?
To recap the recent twists and turns: Musk signed a deal to purchase Twitter in April for $44 billion. Not long after, Musk raised questions and concerns focused on how Twitter assesses the number of fake or “bot” accounts on the platform. Those concerns became the basis for Musk’s declaration that the deal was off in July and Twitter filed a lawsuit just days later, seeking to compel the Tesla/SpaceX CEO to make good on the purchase agreement. With a trial looming later this month, and just days away from a scheduled deposition, Musk pulled an about-face and communicated to Twitter on Monday that he was ready to fulfill the deal on the original terms.
Delaware Chancery Court Judge Kathaleen McCormick gave Musk what he wanted Thursday, pushing the trial out to allow him to reassemble his financing to complete the transaction.
Per their own filing in response to the call for a trial delay, Twitter lawyers fired back, characterizing the request as a further ruse by Musk to postpone finishing the business at hand.
According to reporting by The New York Times, lawyers for Musk accused Twitter of bogging down the process by insisting that the lawsuit continue, while Twitter said the attempt to halt the litigation was “an invitation to further mischief and delay.”
“Twitter will not take yes for an answer,” lawyers for Musk wrote in a legal filing, per the Times. “Astonishingly, they have insisted on proceeding with this litigation, recklessly putting the deal at risk and gambling with their stockholders’ interests. Proceeding toward trial is not only an enormous waste of party and judicial resources, it will undermine the ability of the parties to close the transaction.”
Twitter’s legal team says there’s no good reason for further delays and wanted to see the deal close by Oct. 10. The delay granted by McCormick gives both parties until Oct. 28 to wrap it all up.
Does Musk still have the financial backing to make the deal happen?
The rough financing math behind Musk’s original offer had $15 billion-$16 billion coming from equity investors, $15 billion-$16 billion coming out of Musk’s pocket (on Friday, Forbes listed Musk’s “real time” net worth at just under $220 billion) and $12.5 billion in debt financing.
But, any waffling by either his equity partners or bank backers could leave Musk footing a bigger slice of the $44 billion that Twitter will cost him.
According to The Associated Press, a group of banks, including Morgan Stanley and Bank of America, signed on to loan $12.5 billion of the money Musk needs for the deal. In Thursday’s court motion, Musk alleges that Twitter doesn’t want to set the lawsuit aside because of a “baseless” fear that Musk could fail to get the bank financing.
The banks are “essentially cemented” to the deal by solid contracts, Wedbush analyst Dan Ives told AP. But the debt market has changed dramatically since April. The stock market has tumbled, inflation is high, and interest rates are up as the Federal Reserve tries to slow the economy.
“The banks would be really happy to not to have to take the risk of funding these loans,” Erik Gordon, a law and business professor at the University of Michigan, told The Associated Press. “The agreements seem to be very strong, but I think the banks have their lawyers pulling all-nighters trying to get them out of it if they can.”
Musk’s equity commitments — including $1 billion from Musk’s friend and Oracle co-founder Larry Ellison — are on shakier ground if any in that diverse group of backers have changed their minds, said Kevin Kaiser, an adjunct finance professor at the University of Pennsylvania’s Wharton School, per AP.
“Nobody knows — I don’t know anyway — what their commitment is,” Kaiser said. “So are they able to back out? Because if they’re able to back out, he is on the hook.”