fivelessminutes

Musk does not have to close the deal if there has been a “material adverse effect” at Twitter. (Sections 4.9 and 7.2(b).) “Material adverse effect” is defined on page 5 of the agreement and it is long. Actually the definition doesn’t say much; it just says, tautologically, that a “Material Adverse Effect” is “any change, event, effect or circumstance which, individually or in the aggregate, has resulted in or would reasonably be expected to result in a material adverse effect on the business, financial condition or results of operations” of Twitter. All the action is in the exceptions to the MAE. As I suggested yesterday, there are lots of them, and it is somewhat difficult to think of an event that would cause a material adverse effect on Twitter’s business but not be covered by an exception to the MAE. If Twitter does badly due to all sorts of general conditions (changes in law, general economic and financial conditions, pandemics, etc.), that does not count as an MAE. If Twitter fails “to meet internal, analysts’ or other earnings estimates or financial projections or forecasts for any period,” that doesn’t count as an MAE; just having bad earnings isn’t enough. And, as usual, bad effects that result from “the negotiation, execution, announcement, performance, consummation or existence of this Agreement or the transactions contemplated by this Agreement” do not count as an MAE, though here they felt it necessary to spell out “including (A) by reason of the identity of Elon Musk, Parent or any of their Affiliates or their respective financing sources, or any communication by Parent or any of its Affiliates or their respective financing sources, including regarding their plans or intentions with respect to the conduct of the business of the Company.” If Elon Musk breaks Twitter by tweeting his plans for it, he still has to buy it.