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Elon’s Razor

Photo: Pascal Le Segretain/Getty Images
William D. Cohan
May 29, 2022

The most important thing to understand about Elon Musk’s public dickering over whether he will buy Twitter at $54.20 a share is that Elon has already signed a merger agreement committing him to buy Twitter for $54.20 a share. It’s a legally binding agreement and the Twitter board has said it intends to enforce it—M&A code for don’t mess with the deal unless you want a legal fight. Elon has a few ways to renege, of course, but not many. He can find “something” during his due diligence of Twitter that constitutes a reason for him to abandon the deal. But I don’t see what that could be, and it’s certainly not an abundance of “bots.” Obviously, if he can’t come up with the money he has committed to the $44 billion deal, then he would have an out, and then he could presumably pay his $1 billion break-up fee and walk away.

But from all appearances, Elon is indeed still working hard to get his financing in order. Earlier this week, he revised his plan in a regulatory filing, eliminating his $6.5 billion of margin loans (secured by Tesla stock, down from what was once a $12.5 billion margin loan) and thus raising his equity commitment to an astounding $33.5 billion. That should be a relief for Tesla shareholders, who would have been exposed to a potential share price death spiral, were Elon called upon by his bankers to unload his Tesla stock. The big question now is whether he can actually raise that much equity. If he can, then Elon will own Twitter. If he can’t or decides he doesn’t want to, he won’t own Twitter.