Musk’s Twitter Purchase Includes $1 Billion Fee If Deal Falls Through

Topline

Tesla CEO Elon Musk’s $44 billion deal to buy Twitter will include a fee of $1 billion if either party terminates the agreement, according to a Securities and Exchange Commission filing submitted by the company Tuesday, one day after the social media company’s board backed Musk’s takeover offer.

Key Facts

Key Background

Twitter’s board agreed to Musk’s “best and final offer” of $54.20-a-share 11 days after the world’s richest man made the initial unsolicited bid. Musk’s purchase will be financed by $21 billion in equity and $20 billion in loans from the investment bank Morgan Stanley. The saga began earlier this month, when Musk disclosed he’d bought 9.2% of Twitter and—less than two weeks later—proposed buying the entire company. Twitter initially attempted to thwart any attempts to stage a hostile takeover by adopting a poison pill plan that would dilute Musk’s shares if he tried to purchase more than 15% of the company, but Musk later offered more details on how he intended to pay for the buyout, and some shareholders reportedly pressured the board to accept the offer. Following the board’s unanimous acceptance Monday, Twitter chairman Bret Taylor said the deal “will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders.” The deal is expected to be finalized before the end of the year.

What To Watch For

It is unclear when Twitter’s shareholders will vote to finalize the deal, though the company’s annual meeting of stockholders is scheduled for May 25. However, shareholders can hold a vote at any time.