By now, of course, you’ve heard about Elon Musk’s $44-billion takeover of Twitter.
What you might not know is that there’s fine print in the contract requiring either side to pay out a billion dollars if the deal falls apart.
That is, Twitter would have to pay Musk $1 billion if the company decided to go with a more generous offer from a different suitor.
And Musk would have to pay Twitter $1 billion if his financing for the purchase collapses.
This pricey patch of fiscal quicksand was included in a regulatory filing on Tuesday.
Such provisions in huge acquisitions such as this aren’t unusual. But this one bears watching because of how Musk is funding things.
What we know at this point is that he’s paying with $13 billion in bank loans and $12.5 billion in loans using his Tesla shares as collateral.
Musk also has pledged up to $21 billion in cash, but he has yet to specify where that money’s coming from.
To be sure, he’s the richest person on the planet, so $21 billion in cash isn’t exactly a deal breaker. At the same time, even for a billionaire, that’s not the kind of dough you find under sofa cushions.
So add the $1-billion breakup fee to the rest of the drama as this mega-deal proceeds.