WEBVTT - Is Musk Getting Cold Feet About Acquiring Twitter? 0:00:03.160 --> 0:00:07.960 This is Bloombird Law with June Brusso from Bloomberg Radio. 0:00:09.280 --> 0:00:13.039 All the speculation that Elon Musk is getting cold feet 0:00:13.080 --> 0:00:17.480 about acquiring Twitter comes from Musk himself, from his tweet 0:00:17.560 --> 0:00:20.439 last Friday that the deal was on hold, to his 0:00:20.760 --> 0:00:24.000 very tentative answer to the question at the All In 0:00:24.160 --> 0:00:27.240 summit in Miami on Monday, is this Twitter deal gonna 0:00:27.240 --> 0:00:30.360 get closed? Do you think the chances here? Well, I 0:00:30.400 --> 0:00:34.239 mean it really depends on a lot of factors here. Um, 0:00:34.280 --> 0:00:39.080 I'm still waiting for some sort of logical explanation for 0:00:39.479 --> 0:00:43.800 the number of sort of fake or spam accounts on Twitter. Um, 0:00:43.800 --> 0:00:47.199 and Twitter is refusing to tell us. And then a 0:00:47.400 --> 0:00:50.720 Musk attempt at some legal ease. You know, it's a 0:00:50.720 --> 0:00:54.760 material adverse, uh misstatement. You know, if if if they 0:00:54.840 --> 0:00:59.240 in fact have been um vociferously claiming less than five 0:00:59.320 --> 0:01:02.240 percent of Vega spam accounts, but in fact it is 0:01:02.280 --> 0:01:04.800 four or five times that number, of perhaps ten times 0:01:04.800 --> 0:01:08.000 that number. This is a big deal. Joining me to 0:01:08.040 --> 0:01:10.880 help pass through the latest from Musk is Eric Tallely, 0:01:11.040 --> 0:01:14.600 a professor at Columbia Law School. Eric Musk even made 0:01:14.600 --> 0:01:18.600 a comparison to buying a house with termites. Does it 0:01:18.720 --> 0:01:22.039 sound like he's trying to give some legal reasons for 0:01:22.160 --> 0:01:24.760 getting out of the deal. It sounds like it is. 0:01:25.040 --> 0:01:29.000 It sounds like he has been undergoing some coaching, possibly 0:01:29.240 --> 0:01:32.679 therapy by his lawyer. The grounds that he is now fighting, 0:01:32.720 --> 0:01:36.200 he's starting to invoke some formal legal terms that are 0:01:36.280 --> 0:01:39.720 part of the contract that he signed with Twitter related 0:01:39.760 --> 0:01:43.240 to what's known as a material adverse effect. Now, what 0:01:43.480 --> 0:01:46.839 this basically is, it's sort of an act of God 0:01:46.959 --> 0:01:51.400 type of provision that says, if something, you know, crazy happened, 0:01:51.440 --> 0:01:54.400 there is something that is really awrived from what we 0:01:54.480 --> 0:01:56.960 thought we were getting into, then the buyer or the 0:01:56.960 --> 0:02:01.120 seller can walk away. However, the usual has to these 0:02:01.160 --> 0:02:05.840 sorts of provisions is that they are hard to invoke, 0:02:05.920 --> 0:02:08.120 and if you're going to try to use one of them, 0:02:08.200 --> 0:02:12.480 you actually bear the burden of demonstrating that there was 0:02:12.520 --> 0:02:16.880 this incredible surprise that one would never have expected that 0:02:16.919 --> 0:02:21.359 now has materially undercut the value of this company. And there, 0:02:21.400 --> 0:02:24.800 I think that's going to be an incredibly difficult pill 0:02:25.040 --> 0:02:28.280 for Musket to surmount. The main thing that he is 0:02:28.360 --> 0:02:34.000 citing is that various securities disclosures, Twitter misstated the number 0:02:34.240 --> 0:02:37.120 of their bots. But if, first of all, if you 0:02:37.120 --> 0:02:40.720 actually read the disclosure, they say in a very lawyered 0:02:40.800 --> 0:02:43.600 way that you know, we've tried the best we can 0:02:43.760 --> 0:02:47.040 to determine how many of our accounts are bots and 0:02:47.120 --> 0:02:49.440 how many are not. And this is actually a really 0:02:49.480 --> 0:02:51.880 hard thing to figure out. We may not be getting 0:02:51.880 --> 0:02:54.120 it right. But what we've come up with with our 0:02:54.160 --> 0:02:57.160 sampling is that fewer than five percent. But just realized 0:02:57.240 --> 0:02:59.440 that we might be wrong, and it maybe is it 0:02:59.480 --> 0:03:01.200 the best way to measure there's something up and on 0:03:01.320 --> 0:03:04.040 the way that we've measured it. This does not strike 0:03:04.160 --> 0:03:07.720 me as the type of claim that is analogous to 0:03:07.800 --> 0:03:11.119 saying I hereby proclaimed that there are no termites in out. 0:03:11.360 --> 0:03:14.880 It's almost like proclaiming there might be termites. We haven't 0:03:14.919 --> 0:03:17.440 seen any. We looked, we had a particularly strategy for 0:03:17.600 --> 0:03:19.639 looking for him. We didn't see any, or we didn't 0:03:19.680 --> 0:03:22.680 see that many. But our strategy might be wrong. So 0:03:23.040 --> 0:03:26.520 you've got both a standard for a material adverse effect 0:03:26.639 --> 0:03:29.280 that is very very high, something that's going to have 0:03:29.480 --> 0:03:32.239 to be borne by him that he's going to try 0:03:32.240 --> 0:03:36.720 to make this argument in court, and a glaring alternative 0:03:36.760 --> 0:03:38.680 theory as to why he doesn't want to go through 0:03:38.680 --> 0:03:41.320 with this deal, which is the fact that the prices 0:03:41.320 --> 0:03:43.560 have fallen in the text sector since he signed up 0:03:43.600 --> 0:03:45.720 the deal at fifty four dollars and twenty cents, and 0:03:45.800 --> 0:03:49.440 he now has buyers remorse and therefore is looking anywhere 0:03:49.480 --> 0:03:52.120 to try to find an escape hatch to jump out of. 0:03:52.560 --> 0:03:55.320 But this one does not strike me as one that 0:03:55.480 --> 0:03:57.880 is going to be all that friendly for him. There 0:03:58.000 --> 0:04:00.920 was some talk about renegotiating the price when the house 0:04:00.960 --> 0:04:04.720 has termites, although according to Bloomberg sources, the deal is 0:04:04.760 --> 0:04:08.720 still on track as is. There's always a possibility of 0:04:08.800 --> 0:04:12.000 recutting the price of a deal, but it's always done 0:04:12.120 --> 0:04:15.560 in the shadow of what are the likely rights, duties, 0:04:15.560 --> 0:04:18.800 and obligations that the parties have if they don't. Based 0:04:18.839 --> 0:04:22.599 on this particular assertion by Musk, it seems like a 0:04:22.680 --> 0:04:25.359 notably weak case for him to be able to walk 0:04:25.360 --> 0:04:29.280 away from the deal, very low probability, and therefore, if 0:04:29.320 --> 0:04:32.760 everyone knows that he's bargaining not holding an ace in 0:04:32.839 --> 0:04:35.279 his hand, but holding a tool of club, he's not 0:04:35.320 --> 0:04:37.200 going to be able to bargain for very much. If 0:04:37.200 --> 0:04:39.800 the Twitter board is doing their job, Is any of 0:04:39.839 --> 0:04:43.240 this really surprising given that his approach to this deal 0:04:43.279 --> 0:04:46.240 has been unconventional from the start. But the one thing 0:04:46.240 --> 0:04:50.039 that is maybe a little surprising about his tactics is 0:04:50.080 --> 0:04:53.200 that he has ended up seizing upon something that looks 0:04:53.240 --> 0:04:55.960 like it is going to be a very difficult to 0:04:56.080 --> 0:05:00.400 engineer theory. The material ever's affect the argument very much 0:05:00.560 --> 0:05:03.240 is stacked against him, I would have thought, and in fact, 0:05:03.360 --> 0:05:05.880 I think it may well be the case that this 0:05:06.000 --> 0:05:08.880 strategy may shift if he continues to want to either 0:05:08.920 --> 0:05:10.960 get out of the deal or to go back to 0:05:11.040 --> 0:05:15.039 the bargaining table. Another aspect of this deal is that 0:05:15.120 --> 0:05:18.280 he could potentially walk away, or maybe only walk away 0:05:18.279 --> 0:05:21.080 and have to pay a billion dollars if the financings 0:05:21.200 --> 0:05:24.480 that the deal falls through, And there it seems like 0:05:24.600 --> 0:05:28.520 there might be more rooms for things to happen, particularly 0:05:28.560 --> 0:05:31.640 if the folks who have agreed to lend thirteen billion 0:05:31.640 --> 0:05:34.599 dollars into this deal get cold feet, either get cold 0:05:34.600 --> 0:05:37.400 feet by themselves, or get cold feet after having been 0:05:37.520 --> 0:05:41.200 encouraged to get cold feet from Elon buskinself. So I'm 0:05:41.240 --> 0:05:44.719 going to guess that if this melodrama continues to play out, 0:05:45.160 --> 0:05:48.520 it may end up shifting away from the Bot issue, 0:05:48.560 --> 0:05:50.640 which in my view is a bit of a side show, 0:05:51.040 --> 0:05:55.480 and this financing contingency may take more center stage. Former 0:05:55.520 --> 0:05:58.960 President Trump said, there's no way that Elon Musk will 0:05:59.040 --> 0:06:03.320 buy Twitter such a ridiculous price. Do you agree with that. 0:06:03.480 --> 0:06:06.080 It's seeming more and more unlikely that Musk is going 0:06:06.080 --> 0:06:09.720 to buy Twitter. Well, at last I checked, former President 0:06:09.720 --> 0:06:12.159 Trump had not been to law school. And one of 0:06:12.160 --> 0:06:17.160 the things that is considerable complication here is that Elon 0:06:17.240 --> 0:06:20.960 Musk has already entered into a contract in which he 0:06:21.320 --> 0:06:25.320 substantially obliges himself to make steps towards buying Twitter at 0:06:25.360 --> 0:06:29.640 a cash price that he's already stated. So the economics 0:06:29.680 --> 0:06:33.039 of this deal, I think are probably causing Elon Musk 0:06:33.080 --> 0:06:37.640 to think twice about whether he really has buyer's remorse here. 0:06:37.760 --> 0:06:41.040 Man I suspect he does, if for no other reason, 0:06:41.120 --> 0:06:44.120 because he ended up paying a price that was probably 0:06:44.200 --> 0:06:46.320 higher than it would have been had he just waited 0:06:46.360 --> 0:06:49.040 for a few more weeks. That having been said, the 0:06:49.200 --> 0:06:52.520 history books are filled with people who are buying companies 0:06:52.720 --> 0:06:55.360 who then get some buyer's remorse and try to get 0:06:55.400 --> 0:06:58.360 out of that. But the contracts that they've entered into 0:06:58.800 --> 0:07:01.720 make it either hard or impossible to get out of it. 0:07:01.920 --> 0:07:05.400 So one big factor here is trying to determine to 0:07:05.480 --> 0:07:09.600 what extent the deal that Must ended up entering into 0:07:09.720 --> 0:07:13.080 with Twitter is gonna end up tying his own hands 0:07:13.200 --> 0:07:17.560 later on or forcing a fairly difficult renegotiation with the 0:07:17.600 --> 0:07:20.600 Twitter board sitting on a fair amount of bargaining power. 0:07:21.160 --> 0:07:23.840 If you just sort of stare at the document itself, 0:07:23.880 --> 0:07:26.200 this is a document that looks what they say in 0:07:26.280 --> 0:07:30.360 the industry, relatively seller friendly the company that's selling itself, 0:07:30.400 --> 0:07:33.600 there aren't that many ways that Must can walk away. Now, 0:07:33.600 --> 0:07:35.920 there are some aspects to it that make it look 0:07:35.960 --> 0:07:38.640 like he could. Right. There's a termination fee that he 0:07:38.640 --> 0:07:41.160 would have to pay of a billion dollars if he 0:07:41.160 --> 0:07:43.240 were to walk away, But that's really only one of 0:07:43.280 --> 0:07:46.280 the provisions in the deal. And another one which is 0:07:46.320 --> 0:07:49.960 far more important, is a provision that's called a specific 0:07:50.000 --> 0:07:54.440 performance provision, and that's just legal ease for the either side. 0:07:54.440 --> 0:07:56.400 If the other side wants to try to back out, 0:07:56.720 --> 0:07:59.000 they can essentially force the party or get a court 0:07:59.080 --> 0:08:02.080 order forcing the to go forward. And that's a provision 0:08:02.080 --> 0:08:05.760 that's in this deal. It doesn't provide that many outs 0:08:05.800 --> 0:08:09.640 for Elon Musk. The one that it might help provide 0:08:10.000 --> 0:08:14.000 is if for some reason he's unable to secure financing 0:08:14.080 --> 0:08:18.560 for the deal, then that might allow that specific performance 0:08:18.600 --> 0:08:21.960 provision to fall away. So, you know, I think a 0:08:21.960 --> 0:08:24.360 lot of people are sort of thinking that the disclosure 0:08:24.400 --> 0:08:28.200 he made this weekend about you know, whether Twitter has 0:08:28.240 --> 0:08:32.240 more than five percent spots type or automaton type accounts 0:08:32.520 --> 0:08:36.640 was essentially trying to set the stage for possibly engineering 0:08:36.640 --> 0:08:39.600 a failing of the financing of the deal. Now that 0:08:39.679 --> 0:08:43.120 one itself is kind of complicated for at least two 0:08:43.240 --> 0:08:46.640 or three reasons. The first is there isn't a lot 0:08:46.679 --> 0:08:49.320 of financing left on this deal. It's still a fair 0:08:49.360 --> 0:08:52.600 amount of financing, but most of this deal always has 0:08:52.640 --> 0:08:55.560 been Elon must buying a bunch of stock of Twitter, 0:08:55.920 --> 0:08:58.679 and he's been conscripting a bunch of co investors to 0:08:58.760 --> 0:09:01.560 come on with him and actually reducing the amount of 0:09:01.640 --> 0:09:05.280 debt that he's pledging his Testla shares to help secure. 0:09:05.360 --> 0:09:07.920 So he's been actually reducing the debt that's part of 0:09:07.920 --> 0:09:09.920 this deal, and that's going to make it even harder 0:09:09.960 --> 0:09:13.520 to you know, engineer a situation where the lenders get 0:09:13.559 --> 0:09:16.840 cold feet and walk away. The second thing is that 0:09:17.000 --> 0:09:21.640 the provision that he's you know, evidently complaining about is 0:09:21.679 --> 0:09:25.280 something that has been in Twitter's disclosures for a long time. 0:09:25.360 --> 0:09:28.640 It's a heavily lawyered provision that says, by our account, 0:09:28.760 --> 0:09:31.240 we don't have more than five percent of these thoughts 0:09:31.320 --> 0:09:34.120 who are account holders, but realize that there are just 0:09:34.160 --> 0:09:36.400 a bunch of different ways to count this up in 0:09:36.480 --> 0:09:38.640 the hand, other ways of counting it up may differ. 0:09:38.760 --> 0:09:41.800 So it's a heavily lawyered disclosure, one that I don't 0:09:41.800 --> 0:09:44.840 think anyone would really rely on per se. And yet 0:09:45.040 --> 0:09:48.120 this seems to be the attack that Musk is taking, 0:09:48.120 --> 0:09:50.840 either so he can figure out a way to walk 0:09:50.880 --> 0:09:53.920 away himself or give his lenders a pretext to say 0:09:53.920 --> 0:09:56.920 we refuse to lend from here on end. But it 0:09:57.000 --> 0:10:00.679 looks relatively thin. It has a very pretext little aspect 0:10:00.720 --> 0:10:04.240 about it. Given what we've always known about Twitter, when 0:10:04.320 --> 0:10:09.200 would must be forced into specific performance and when would 0:10:09.240 --> 0:10:12.440 he be allowed to pay the billion dollar breakup fee? 0:10:12.720 --> 0:10:16.720 So if, for example, some of the things that were 0:10:16.760 --> 0:10:22.880 warranted or represented in the transaction didn't materialize, or if 0:10:22.960 --> 0:10:25.959 some of the structures that were part of the deal 0:10:26.160 --> 0:10:29.240 just couldn't come together, he might be able to walk 0:10:29.280 --> 0:10:33.200 away and pay this termination. See on the other hand, 0:10:33.480 --> 0:10:38.760 that termination is clearly subservient to this specific performance provisions. 0:10:38.760 --> 0:10:40.680 So a lot of people have sort of thought, oh, 0:10:40.840 --> 0:10:42.760 he always has this option just to walk away and 0:10:42.800 --> 0:10:45.760 pay at the excellent That's only true if the specific 0:10:45.800 --> 0:10:50.319 performance provision is not in play, and that provision turns 0:10:50.320 --> 0:10:52.000 out that you can draft them in a bunch of 0:10:52.000 --> 0:10:54.640 different ways, And a lot of these contracts have specific 0:10:54.640 --> 0:10:57.839 performance provisions. Some of them have more escape hatches than 0:10:57.880 --> 0:11:01.080 the others. By my read of this specific big performance division, 0:11:01.240 --> 0:11:04.680 the only real escape hatch is a failure of financing, 0:11:05.000 --> 0:11:08.880 and so the specific performance aspect of this contract is 0:11:09.280 --> 0:11:12.120 very much a strong hand that the Twitter board is 0:11:12.120 --> 0:11:14.439 going to be able to play. You know, the one 0:11:14.559 --> 0:11:18.160 thing that he might end up trying to do is 0:11:18.200 --> 0:11:22.920 to attempt to be active in engineering. A failure of 0:11:23.000 --> 0:11:26.559 financing essentially a you know, bring the dog to the homework, 0:11:26.679 --> 0:11:28.360 you know, put some dog food on the homework and 0:11:28.400 --> 0:11:31.000 has the dog eat it. But that raises a bunch 0:11:31.000 --> 0:11:33.920 of risks itself. It maybe that some of these lenders, 0:11:33.960 --> 0:11:35.880 maybe the whole reason they came along is that They 0:11:35.920 --> 0:11:37.960 just want to make sure that they stay in in 0:11:38.080 --> 0:11:42.000 Musk's good graces so that next time Twitter needs some financing, 0:11:42.080 --> 0:11:44.800 or next time SpaceX or the boring company needs to 0:11:44.840 --> 0:11:47.480 do some deals, they're going to be in his role 0:11:47.480 --> 0:11:49.160 of decks and they don't want to, you know, push 0:11:49.240 --> 0:11:51.679 him back, And so it might be that they'll play 0:11:51.760 --> 0:11:55.240 ball with possibly you know, sort of faking their way 0:11:55.320 --> 0:11:58.600 to a refusal to finance the deal. But that comes 0:11:58.640 --> 0:12:01.680 with risks as well. You know, those banks also have 0:12:01.840 --> 0:12:05.160 other clients that they want to maintain reputations for, and 0:12:05.320 --> 0:12:07.160 you know, when they come in to finance a deal 0:12:07.200 --> 0:12:09.960 and say, no, this financing is firm, do they cannibalize 0:12:10.000 --> 0:12:12.560 their own reputation by having a case in the past 0:12:12.559 --> 0:12:15.040 where they just change their mind willing nearly on the 0:12:15.400 --> 0:12:17.920 hest of an important client that causes them to lose 0:12:17.920 --> 0:12:21.640 credibility in the market. Possibly just as important is that 0:12:21.760 --> 0:12:25.000 if these third parties play an active role in trying 0:12:25.040 --> 0:12:27.920 to gin up kind of a fabricated case for why 0:12:28.000 --> 0:12:31.120 financing is impossible anymore, that could put them in some 0:12:31.280 --> 0:12:34.720 legal peril themselves for basically playing an active role in 0:12:34.880 --> 0:12:39.640 effectively helping someone else breach a contract. And so there 0:12:39.840 --> 0:12:42.000 is a little bit of exposure if you're too willing 0:12:42.040 --> 0:12:43.880 to play ball with the elon Musk, even if you 0:12:43.920 --> 0:12:46.800 really want to preserve those later potential fields. So where 0:12:46.840 --> 0:12:49.040 does this all add up the Twitter board. If they 0:12:49.080 --> 0:12:51.000 want to play our strong hand, they're going to be 0:12:51.040 --> 0:12:54.000 able to play a strong legally. They've got a very 0:12:54.000 --> 0:12:56.720 good position from which the bargain. On the other hand, 0:12:56.920 --> 0:12:59.520 you know, Musk is a guy who clearly has shown 0:12:59.600 --> 0:13:02.960 himself to be disruptive in all walks of life, including 0:13:03.760 --> 0:13:06.559 various other people out there who are his adoring fans 0:13:06.600 --> 0:13:09.120 and who might take it upon themselves to have a 0:13:09.120 --> 0:13:12.800 personal mission to you know, crash Twitter stock if things 0:13:12.840 --> 0:13:16.280 go poorly, and so that type of disruption is probably 0:13:16.520 --> 0:13:18.480 the main thing he's going to bring to the table 0:13:18.520 --> 0:13:21.960 of that potential for disruption. It isn't a legal claim. 0:13:22.240 --> 0:13:24.960 You know, Well, he's got a couple of windows of opportunity. 0:13:25.120 --> 0:13:28.520 Maybe they are relatively narrow, and most people, I think, 0:13:28.559 --> 0:13:30.839 don't sort of think that that's going to have much 0:13:30.880 --> 0:13:33.440 of an effect. But his broader sort of you know, 0:13:33.640 --> 0:13:37.160 social influence, you know, no doubt, could throw some turbulence 0:13:37.160 --> 0:13:40.840 into these negotiations. My sense probably what's going to end 0:13:40.920 --> 0:13:43.200 up happening is that they will go back and they 0:13:43.240 --> 0:13:45.640 will sort of consider whether there's a deal to be had. 0:13:45.720 --> 0:13:47.439 I don't think the Twitter board is going to give 0:13:47.559 --> 0:13:50.280 up much, if anything at all. Possibly there will be 0:13:50.320 --> 0:13:53.600 a small readjustment to price, simply so everyone could claim 0:13:53.720 --> 0:13:56.160 victory and walk away with their arms in the air. 0:13:56.440 --> 0:13:58.760 But I don't see this. I don't see this price 0:13:59.400 --> 0:14:04.199 migrating very far below the price. I mean, the Twitter 0:14:04.240 --> 0:14:08.080 board was forced into a green and musque, weren't they, 0:14:08.120 --> 0:14:10.800 I mean, do they want musk? Well, the irony of 0:14:10.800 --> 0:14:13.040 this is that they hadn't put up this poison pill 0:14:13.160 --> 0:14:16.080 before they finally reached an agreement to busk. And the 0:14:16.240 --> 0:14:18.360 usual reason that a board will put up a poison 0:14:18.400 --> 0:14:20.080 pill is to say, look, we're not going to allow 0:14:20.160 --> 0:14:23.120 this person to manipulate our shareholders into selling it too 0:14:23.120 --> 0:14:25.080 low of a price. So we're putting up the poison 0:14:25.080 --> 0:14:27.720 till so we can bargain for a better price so 0:14:27.760 --> 0:14:31.480 that this potential acquirer doesn't go around us and end 0:14:31.560 --> 0:14:35.120 up manipulating our shareholders. When they finally reached the deal, 0:14:35.200 --> 0:14:36.600 one of the things that a lot of people were 0:14:36.640 --> 0:14:39.680 surprised at including myself, is that the price that they 0:14:39.720 --> 0:14:42.360 reached didn't change at all from the very price that 0:14:42.440 --> 0:14:44.400 he offered them to begin with. And so there was 0:14:44.440 --> 0:14:47.400 almost a sense in which a lot of people were thinking, hey, 0:14:47.480 --> 0:14:50.040 Board of Directors, if you did the poison pills so 0:14:50.080 --> 0:14:52.000 that you could have a lot of bargaining power, you 0:14:52.040 --> 0:14:55.000 sure didn't seem to exercise very much when the same 0:14:55.160 --> 0:14:57.240 terms that he offered came out the other end of 0:14:57.280 --> 0:15:00.400 the bargaining. And so, weirdly enough, the twitter A board 0:15:00.480 --> 0:15:03.000 was already taking a little bit of heat for being 0:15:03.200 --> 0:15:06.800 too limp when it came to bargaining with Elon Musk. 0:15:06.920 --> 0:15:10.800 And now how fortunes have turned now that seemingly limp 0:15:10.880 --> 0:15:13.160 deal that they reached with him, that they didn't really 0:15:13.160 --> 0:15:16.440 extract that much more from him, is now looking like 0:15:16.520 --> 0:15:19.520 it was certainly a fortuitous, if not a genius move 0:15:19.600 --> 0:15:21.680 by the board. So there's almost a sense in which, 0:15:21.800 --> 0:15:24.200 you know, I think part of the you know, part 0:15:24.200 --> 0:15:27.520 of the board sort of fighting to reclaim their honor 0:15:27.800 --> 0:15:30.560 right that said, no, we we really engaged in heavy 0:15:30.560 --> 0:15:34.200 bargaining is going to probably push them to dig their 0:15:34.240 --> 0:15:36.680 heels in a little bit more than they might otherwise 0:15:36.720 --> 0:15:40.160 do do they have also fiduciary duties that they have 0:15:40.400 --> 0:15:45.680 this offer at and if they go much below that, 0:15:45.960 --> 0:15:50.320 are they for going their fiduciary duties to the shareholders. Yeah. 0:15:50.360 --> 0:15:52.800 Once a company has decided it's going to sell control 0:15:52.840 --> 0:15:55.400 to someone else, it is under a heightened form of 0:15:55.400 --> 0:15:58.720 fiduciary duties. It's sometimes called Revlon duties. It has to 0:15:58.720 --> 0:16:00.920 do with a famous case in involve Revalent back in 0:16:00.960 --> 0:16:04.160 the nineteen eighties. And when you are under those sort 0:16:04.200 --> 0:16:08.320 of heightened fiduciary obligations, you're under an obligation to take 0:16:08.400 --> 0:16:11.400 to only take steps that are going to reasonably maximize 0:16:11.440 --> 0:16:14.560 the benefit to your shareholders in the short term. So 0:16:14.680 --> 0:16:17.360 right now, if they're sitting as the board and they've 0:16:17.400 --> 0:16:21.520 got a fifty four offer that has been signed up, 0:16:21.560 --> 0:16:24.000 that is on the table, that doesn't have very many 0:16:24.040 --> 0:16:26.960 closing conditions associated with it, it's going to be really 0:16:26.960 --> 0:16:29.160 hard for the other side to get out of. If 0:16:29.160 --> 0:16:31.240 they end up sort of backing out of it, that 0:16:31.320 --> 0:16:34.120 could put the board itself into peril for not having 0:16:34.120 --> 0:16:37.720 a backup plan yet letting go of what is clearly 0:16:37.840 --> 0:16:40.880 now emerged as a relatively good offer better than anything 0:16:40.960 --> 0:16:43.480 else that twitters can have. If you kind of combine 0:16:43.520 --> 0:16:46.040 that with the fact that you know, in the days, 0:16:46.360 --> 0:16:50.120 you know, leading up to Musk's um suddenly getting cold feet, 0:16:50.600 --> 0:16:54.000 the senior executive riggs that at Twitter looked like a 0:16:54.440 --> 0:16:57.640 rotisserie oven. They were moving, they were moving out old 0:16:57.640 --> 0:17:00.320 ones and moving in new ones almost start only at 0:17:00.320 --> 0:17:02.480 the hest of trying to get this company ready for 0:17:02.560 --> 0:17:04.920 its take over by Elon Boston, some of the people 0:17:04.960 --> 0:17:06.879 that you know he was going to clearly butt heads with. 0:17:07.160 --> 0:17:10.000 So there's a sense in which now Twitter has effectively 0:17:10.359 --> 0:17:13.680 morphed itself enough into something that might even be damaged 0:17:13.720 --> 0:17:15.520 goods to anyone else who is going to buy the 0:17:15.520 --> 0:17:17.520 company later on. And I think that gives the board 0:17:17.600 --> 0:17:20.320 m an additional reason why they should fight right and 0:17:20.359 --> 0:17:23.159 not concede, because if they concede, it may not be 0:17:23.359 --> 0:17:25.920 very long before a plaintive attorney says, hey, what were 0:17:25.920 --> 0:17:27.919 you doing? You have this great deal signed up and 0:17:27.960 --> 0:17:31.119 now basically, you know, gave away the farm with no 0:17:31.200 --> 0:17:34.640 backup plan. What do you make of this? Elon Musk 0:17:34.680 --> 0:17:38.560 tweeting Twitter Legal just call to complain that I violated 0:17:38.600 --> 0:17:44.560 your nondisclosure agreement by revealing the box check sample sizes one. Yeah, 0:17:44.600 --> 0:17:47.000 so we don't actually know what's in the NBA because 0:17:47.040 --> 0:17:50.399 that's not been disclosed us. But there probably is an 0:17:50.480 --> 0:17:52.600 NBA that has to do with some aspects of the 0:17:52.680 --> 0:17:56.000 due diligence associated with the deal. So anytime you are 0:17:56.080 --> 0:17:58.760 buying a company, you usually want to do a fair 0:17:58.800 --> 0:18:01.480 amount of investigation on some of the aspects of what 0:18:01.560 --> 0:18:04.840 are inside the company. That's usually why these deals end 0:18:04.920 --> 0:18:07.520 up taking a fair amount of time, because the buyer 0:18:07.600 --> 0:18:10.640 is trying to satisfy themselves that they're getting something that's valuable. 0:18:10.880 --> 0:18:13.600 In this case, it appears that that musk not only 0:18:13.880 --> 0:18:16.560 didn't try to do a lot of that due diligence, 0:18:16.800 --> 0:18:21.040 but he also didn't extract a contractual warranty in the 0:18:21.119 --> 0:18:23.560 contract itself. A says you know, don't worry, we have 0:18:23.600 --> 0:18:25.639 at most five percent bought. You can't find that in 0:18:25.640 --> 0:18:28.359 the contract itself. That's one of the reasons why you 0:18:28.400 --> 0:18:31.480 know he's sort of you know, casting about the securities 0:18:31.520 --> 0:18:34.119 markets disclosures. So there's a sense in which you know, 0:18:34.160 --> 0:18:37.000 this dog ate my homework thing really is resonant. There's 0:18:37.040 --> 0:18:40.680 there's essentially nothing surprising in any of the disclosures, he 0:18:40.760 --> 0:18:42.920 talked about it. It was out there in plain sight 0:18:43.080 --> 0:18:45.280 for everyone to see. You know, there had even been 0:18:45.520 --> 0:18:48.639 a public dispute about the number of boss that members 0:18:48.640 --> 0:18:51.000 the Twitter hand, so you know it's he was suggesting 0:18:51.040 --> 0:18:54.000 he didn't bother doing his diligence of the deal, or 0:18:54.119 --> 0:18:56.399 he didn't intend to do any diligence on the deal. 0:18:56.880 --> 0:18:59.960 And he also didn't bake in any promises to the 0:19:00.040 --> 0:19:03.359 contrary in the contract. So it has a lot of 0:19:03.359 --> 0:19:07.960 the trappings of a fairly hastily entered into contract that 0:19:08.160 --> 0:19:11.280 was for cash, that didn't have too many contingencies in it. 0:19:11.359 --> 0:19:13.960 And now he's starting to feel like, oh wow, maybe 0:19:13.960 --> 0:19:15.320 I don't really want to go through with it, or 0:19:15.320 --> 0:19:18.119 maybe I can threaten to walk away and get a 0:19:18.160 --> 0:19:22.399 better price. In most universes, given the documents that I've seen, 0:19:22.760 --> 0:19:26.520 that that is a pretty speculative bet. But you know, 0:19:26.720 --> 0:19:29.760 who knows what to expect in the Elon Musk universe. 0:19:29.800 --> 0:19:32.040 We've already learned that it is somewhat of a parallel 0:19:32.119 --> 0:19:34.760 universe from the one everyone else of us lives in. 0:19:35.280 --> 0:19:38.520 Looking at the paperwork it's or looking at the deal, 0:19:39.200 --> 0:19:41.840 what do you think the chances are that he will 0:19:41.880 --> 0:19:46.439 actually buy Twitter. I think they are still pretty high. 0:19:46.600 --> 0:19:49.399 I think the specific performance aspect of it is going 0:19:49.440 --> 0:19:53.200 to play a fairly large role. Ultimately, it may take 0:19:53.240 --> 0:19:55.320 a while, and they may end up, you know, trying 0:19:55.480 --> 0:19:58.520 deciding to grease the wheels and having a light break 0:19:58.800 --> 0:20:02.040 in price. Much is going to turn on whether the 0:20:02.119 --> 0:20:05.119 lenders that are lined up to lend money for this 0:20:05.240 --> 0:20:08.320 acquisition themselves get cold beat. And if they do get 0:20:08.359 --> 0:20:11.240 cold beat, do they do so sort of honestly or 0:20:11.280 --> 0:20:13.280 do they do so in a somewhat of a managed 0:20:13.359 --> 0:20:16.240 and engineered way. If they do so and do so honestly, 0:20:16.320 --> 0:20:18.639 that's the only contingency I can see in which this 0:20:18.720 --> 0:20:21.240 deal doesn't end up closing. I think a lot of 0:20:21.240 --> 0:20:23.800 people out there sort of feel like it probably will 0:20:23.920 --> 0:20:26.040 end up closing. And I think this is all a 0:20:26.040 --> 0:20:28.119 big dance to see if he can get a slight 0:20:28.160 --> 0:20:31.440 price reduction. Thanks for being in the Bloomberg Law Show, Eric. 0:20:31.720 --> 0:20:37.520 That's professor Eric Tally of Columbia Law School. On Monday, 0:20:37.560 --> 0:20:40.040 the Supreme Court, by a vote of six to three, 0:20:40.280 --> 0:20:44.040 struck down another campaign finance law, adding to a line 0:20:44.040 --> 0:20:49.000 of rulings throwing out campaign finance restrictions. Republican Senator Ted 0:20:49.080 --> 0:20:53.399 Cruz had challenged the two fifty dollar cap on candidates 0:20:53.480 --> 0:20:57.840 using political contributions made after an election to recoup their 0:20:57.840 --> 0:21:02.240 personal campaign loans. The this vision was along ideological lines, 0:21:02.560 --> 0:21:06.639 and Chief Justice John Roberts wrote the majority opinion, finding 0:21:06.680 --> 0:21:10.760 that the provision burden's core political speech without furthering an 0:21:10.760 --> 0:21:14.879 anti corruption goal. Echoing what Roberts and Justice Amy Coney 0:21:14.920 --> 0:21:18.360 Barrett said during the oral arguments, there isn't a sufficient 0:21:18.400 --> 0:21:22.240 corruption anti corruption interests sort of up to two thousand, 0:21:22.280 --> 0:21:27.440 but then all of a sudden there is says that 0:21:28.359 --> 0:21:31.640