Elon Musk, CEO of SpaceX and Tesla, may have to pay Twitter a $1 billion shutdown fee under certain circumstances, such as if Musk doesn’t accumulate enough debt to complete a $44 billion deal to buy the company, due to a new SEC filing.
From the filing (mother cites Musk Corporation, set up to buy Twitter). On the other hand, Twitter owes Elon Musk a $1 billion breakup fee if it fails to find a competitive offer or if shareholders rightfully reject the deal documentation.
As described above, if the parent entity and the acquiring entity’s obligations to carry out the merger are met. And the parent entity fails to complete the merger as required in the merger agreement. Including due to equity, debt, and margin funding, the loan is not funded, the Twitter parent must pay a $1.0 billion termination fee.
Musk offered to buy the company for $54.20 per share and make it private. He said Twitter should function as a digital public space that tolerates multiple points of view. Tesla shares were down more than 12% on Tuesday, while tech’s Nasdaq Composite was nearly 4%. Other mega-cap tech stocks such as Apple, Amazon, Google, and Meta, Facebook’s parent company, fell more than 3%.
Electric vehicle makers Rivian and Lucid also closed up 9.5% and 8.7%, respectively.
The declines came just a day after Twitter’s board of directors approved its $44 billion acquisition of Musk’s company. Suggesting some of the slides may reflect investor concerns about the deal. Musk has secured $25.5 billion in debt, including a $12.5 billion loan against his stake in Tesla. The agreement also includes $21 billion in equity.
Despite being the wealthiest person globally, most of Musk’s fortune is tied to Tesla shares, meaning he may need to borrow his fortune to fund deals.
Tesla investors may also be concerned about the potential disruption from owning a platform like Twitter. Musk wants to significantly influence the company’s operations, resulting in a time crunch for him. Assuming the deal works, Musk will be in charge of Tesla, Twitter, and SpaceX. He also owns two smaller companies, Boring Company and Neuralink.
Automakers, including Tesla, are grappling with rising costs of raw materials used in batteries and a shortage of semiconductor chips, exacerbated by the Covid restrictions in Shanghai. Tesla said in its earnings report for the first quarter of 2022 on April 20 that the company. Although auto revenue, fell 87% year-on-year due to Covid. Tesla made an estimated $4.65 billion in China in the first quarter of 2022. The Chinese market now accounts for 24.8% of Tesla’s sales.