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Old 14-05-2022, 15:07   #48
Damien
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Re: Elon Musk buys Twitter for $44 Billion

Quote:
Originally Posted by Chris View Post
Any offer to make a very large purchase is subject to due diligence. We all do it at some time in our lives - a house purchase offer is always subject to satisfactory surveys. Even if the home report is available from the outset, various other searches have to be done and in some cases special surveys of the electrical or gas systems may take place.
Elon Musk skipped it though, he has committed to buying Twitter unless something major happens. He hasn't made an offer pending due diligence, he waved that right already and signed the deal: https://news.sky.com/story/elon-musk...-flap-12612206

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It is the sort of issue that might have been addressed in due diligence - the process by which buyers and their banks closely examine the company they are acquiring - had Musk not waived that step in order to hustle the Twitter board into a swift decision on his offer.

There is a good breakdown here of why this 'on hold' story is yet more Elon Musk showmanship: https://www.bloomberg.com/opinion/ar...trolls-twitter

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“Temporarily on hold” is not a thing. Elon Musk has signed a binding contract requiring him to buy Twitter. Legions of bankers and lawyers and Twitter employees and special-purpose-vehicle promoters are working to fulfill his legal obligation to get the deal closed. “The parties hereto will use their respective reasonable best efforts to consummate and make effective the transactions contemplated by this Agreement,” says the merger agreement. (Section 6.3(a).) He can’t just put that “on hold.”

That contract does not allow Musk to walk away if it turns out that “spam/fake accounts” represent more than 5% of Twitter users. We discussed this last month, when Twitter admitted in a securities filing that it had (slightly) overestimated its daily active users for years. The merger agreement contains a provision that allows Musk to walk away if Twitter’s securities filings are wrong — and this 5% number is in its securities filings — but only if the inaccuracy would have a “Material Adverse Effect” on the company. (See Sections 4.6(a) and 7.2(b).) That is an incredibly high standard: Delaware courts have almost never found an MAE. An MAE has to be something that would “substantially threaten the overall earnings potential of the target in a durationally-significant manner,” the courts have said; there is a rule of thumb that an MAE requires a 40% decrease in long-term profitability. If it turned out that 6% or 20% or 50% of Twitter accounts are bots, that will be embarrassing and might even reduce Twitter’s future advertising revenue, but will it be an MAE? No.
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