Musk deposition is DELAYED for negotiations

Elon Musk’s impeachment was delayed Thursday as he and Twitter executives continue to negotiate the terms of his $44 billion acquisition.

Both sides agreed to postpone Musk’s impeachment scheduled for Thursday in Texas as they continue to smooth out a deal that would halt a non-jury trial in Delaware on Oct. 17, according to the Wall Street Journal.

Among the many issues they would discuss is whether Tesla’s CEO will try to make the deal contingent on its original $12.5 billion debt financing package as banks try to work their way out of the deal.

The banks could argue that Musk’s antics in delaying the deal have damaged Twitter enough, enough to qualify as a material adverse effect, causing them to walk away, the New York Times reports.

And Musk could even foil his own deal by refusing to sign a letter declaring Twitter solvent, though the judge in the case will likely force the billionaire to sue the banks for the agreed-upon money under New York law. that applies to them.

On the other hand, Twitter executives are trying to make sure Musk doesn’t come out of his agreement again, seeking reconfirmation of the details in the previously agreed-upon contract.

They are also considering options such as judicial oversight of the closing process and requesting that Musk pay interest to make up for the delays.

Without an agreement, neither side has requested a postponement of the trial, and it is still scheduled for later in the month.

“The parties have not filed a clause to suspend this action, nor has any party applied for suspension. I therefore continue to move forward to our trial, which begins October 17, 2022,” Chancellor Kathaleen McCormick, the judge of the Delaware’s Court of Chancery, wrote in a court filing on Wednesday.

Musk surprised investors Monday when he suddenly announced that he would stick to his April agreement to buy the company for $54.20 a share if Twitter dropped its lawsuit against him.

But the proposal included a condition that closing the deal was conditional on the necessary debt financing.

It’s likely an agreement between the two parties would remove that condition, a Reuters source familiar with the negotiations said earlier, after Apollo Global Management and Sixth Street withdrew from the deal to help fund the buyout.

The two companies were not among the 18 equity investors named in a May SEC filing with a list of Musk’s backers, but had previously participated in talks about providing about $1 billion in financing for the deal.

Those talks have now ended, sources familiar with the matter told Reuters on Wednesday.

Musk has since said he would fund the deal with his own cash, fellow investors and bank financing, as historic inflation, rising interest rates and economic uncertainty caused by the war in Ukraine make such deals more expensive for lenders.

When investor banks finance a leveraged buyout, they usually try to shift the debt to outside investors, such as hedge funds or other large institutions.

The banks then monetize the fees they charge to close these deals, and they sell the debt to reduce their risks in case borrowers fail to repay.

But in the current economic situation, it’s much harder for the banks to get rid of that debt – and if they do, they could lose significant sums of money.

It remains unclear what impact the Apollo and Sixth Street withdrawals could have on the structure of the deal.

The banks’ $12.5 billion in debt financing is rock solid, according to analyst Ives, who wrote that “the banks are essentially locked into this Twitter debt deal and we see no way out despite today’s very tough debt markets.”

“We continue to believe that the deal will move smoothly despite some late-night poker moves from the Twitter camp with the Delaware Court case around the corner,” he wrote in a note Wednesday night.

Meanwhile, Musk had tried to devalue Twitter’s price before renewing his original offer Monday.

The New York Times reports that Musk had personally pleaded with Twitter to cut the deal price by as much as 30 percent, valuing the company at $31 billion.

But Twitter executives rejected the proposal, as well as another one to cut the price tag by 10 percent, before Musk agreed.

As of Thursday, the social media giant’s shares were valued at $51.11, up nearly 20 percent over the past five days.

In court on Wednesday, Judge McCormick said neither Twitter nor Musk asked the court to suspend the case.

McCormick ruled on motions related to Twitter’s attempts to obtain messages, documents or statements that could be used as evidence in court in Delaware’s Chancery Court.

She said in her statement that Musk’s side had not provided Twitter with copies of all the messages he exchanged about the buy-out agreement, and had “probably” had some Slack messages deleted automatically.

“If defendants have deleted documents after having held a hold, then a remedy is indicated, but the correct remedy is unclear to me at this stage,” McCormick said in her ruling.

She added that she will postpone ruling on the case until after the trial, when she has “a better understanding of the case file.”

The move follows many twists and turns in the saga, after Musk signed an agreement to buy Twitter on April 25, but then furiously tried to back out of the deal, citing the social media site’s problems with fake accounts, before giving his stance turned again when the trial loomed.

Twitter’s legal team and Musk’s lawyers informed the judge on Tuesday of their efforts to overcome mutual mistrust and find a process to close the deal.

A lawyer representing a proposed class action against Musk on behalf of Twitter shareholders wrote to McCormick to say Musk would have to make a “substantial down payment” in case he reneges on his commitment to close.

Musk would also have to pay interest for delays in closing the deal, according to lawyer Michael Hanrahan’s letter.

Musk said in July that he was withdrawing from the deal after discovering that Twitter had allegedly misled him about the number of fake accounts, among other things.

Part of Musk’s case was based on accusations made by Twitter whistleblower Peiter “Mudge” Zatko that went public in August.

The Twitter legal team wanted to investigate whether Quinn Emanuel’s attorney Alex Spiro, who led the case for Musk, communicated with the whistleblower as early as May.

Twitter lawyers suspected that Zatko sent an anonymous email to Spiro on May 6.

The sender claimed to be a former Twitter employee, offered information about the company and suggested communicating in alternative ways.

Spiro said in a court filing Wednesday that he never read the email until Twitter brought it to his attention and it looked like someone looking for a job.

Spiro also said he was not aware of the existence of Zatko’s allegations before they went public on Aug. 23.