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Elon Musk and His Lenders are Stuck With Buying Twitter

By: Jacob Yang

The banks that are funding Elon Musk’s endeavor to buy Twitter are legally prevented from pulling out of the project.

Musk’s original idea when he first thought about acquiring Twitter was to delete fake accounts on the site and share its content algorithm with the public. In April, he offered to buy the entire company, offering $44 billion. Now, Elon Musk does not think it’s worth it; he said he is concerned about the future of the business. Stock prices have fallen and there are fears about a potential recession.

Currently, Musk is the world’s richest man, but still does not have $44 billion, 20% of his entire net worth, to spend. Therefore, he has asked for loans from many funders including the Royal Bank of Canada and the Canadian Imperial Bank of Commerce. Since Musk’s change of decision, however, he, the banks, and Twitter could be about to make a deal for the company.

This is especially bad news for the lenders because they’re forced to give money to a man to buy a company who doesn’t even want it. Adam Badawi, a law professor at the University of California at Berkeley, said, “[The banks have] signed commitment letters so they’re [ ] committed … Other companies wouldn’t want to work with them if they reneged.”

However, even if they banks were able to pull out, they would probably choose not to because if Musk gets another deal, they could be possible partners, earning tons of money in the process. “Musk is still the world’s wealthiest man and will have a lot of need for debt financing in the future regardless of how the Twitter situation ends … You want to keep his business if you’re a bank, because I think it’s pretty lucrative,” said Carl Tobias, a law professor at the University of Richmond. In addition, the banks only pay if Musk and Twitter agree to the deal, which many people say is unlikely. “Musk [would] pay Twitter a hefty fee for putting it through so much trouble, but walk away in the end,” said Mr. Tobias.

Now, all Twitter wants is to close the deal. If it does not, it could have shareholder lawsuits. Currently, stocks are at $36, but Musk is offering $54 each. And even if Musk leaves the deal completely, the price could plummet. Ev Williams, one of Twitter’s founders, said that if he were still on the board, he’d “be asking if we can just let this whole ugly episode blow over.”

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