Even WWIII wouldn’t let Elon Musk cancel his Twitter deal – Quartz
Elon Musk is fighting tooth and nail to get out of his $44 billion deal to buy Twitter. The problem is that there aren’t many ways out.
In a subpoenaed text message sent May 8 to Morgan Stanley banker Michael Grimes, Musk wrote, “Let’s slow down for a few days. Putin’s speech tomorrow is extremely important. It wouldn’t make sense to buy Twitter if we’re heading into World War III.
There are three problems with this statement: First, Musk had already agreed to buy Twitter on April 25. second, that agreement had a specific performance clause, meaning he might not just be liable for civil damages for breach of contract; he could be forced in court to buy Twitter. Third, World War III won’t let him out of the deal.
According to the merger agreement (pdf), Musk would have to show that something had a “material adverse effect,” or MAE, on Twitter’s business in order to walk out of the deal. Here’s how the merger agreement defines a MAE (bold added for emphasis):
“Material Adverse Effect on the Company” means any change, event, effect or circumstance which … has resulted or could reasonably result in a material adverse effect on the business, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole; provided, however, that any changes, events, effects or circumstances which directly or indirectly, insofar as they relate to or result from the following, are excluded from, and not taken into account in determining the material adverse effect on the company: (i) any condition, change, effect or circumstance generally affecting any of the industries or markets in which the company or its subsidiaries operate; (ii) any change in law or GAAP (or any change in the interpretation of law or GAAP); (iii) general economic, regulatory or political conditions (or changes thereto) or conditions (or changes thereto) in the financial, credit or securities markets (including changes in interest or currency exchange rates) in the States United States or any other country or region in the world; (iv) any act of God, force majeure event, natural disaster, terrorism, cyber attack, data breach, armed hostilities, sabotage, war or any escalation or aggravation of any of the foregoing; (v) any epidemic, pandemic or epidemic of contagious disease (including COVID-19) and any political or social condition, including civil unrest, protests and public demonstrations or any other COVID-19 measures related to an epidemic or arising therefrom, pandemic or outbreak of disease (including COVID-19) or any change in such measures, guidelines, statements or directives or interpretation thereof, or any continuation or of any of the foregoing, in the United States United States or any other country or region in the world
So it will take more than World War III to get Musk out of the Twitter deal. But Musk got a victory in court today.
While Delaware Chancellor Kathaleen McCormick denied Musk’s request to delay the trial, she allowed Musk to add Twitter whistleblower Peiter Zatko’s allegations as possible grounds for backing out of the deal. Zatko alleged in a federal whistleblower complaint that Twitter had serious security flaws and violated its 2011 FTC consent decree by mishandling user data. This will be a sharper argument than anything about World War III.