Musk and Twitter - Will He or Won't He??

trial date is still set for October. So what's going on here? To tell us is Eric Talley, a professor at Columbia Law School, why do you think Musk came in at the original offer price instead of trying a lower price. Well, look like any situation in which you know the parties are a party is reaching or trying to find resulution. There could be a whole bunch of different reasons. One of them, boast practically probably is the fact that everything is lined up to close the deal

at twenty cents. The shareholders have voted, proxies have been sent out, the lenders have signed up to a deal that's going to go off with that price. So if you're going to change the price from that, like if if we're going to go for a settlement at fifty three twenty or something like that, pretty much all those things have to be put back in place again, and

that can take some time. And you know, in the current market conditions, no one really is the biggest friend of trying to stall so long as you're trying to get this deal done. So that may be one of the main reasons why there's some attraction to getting exactly the same financial terms as we're with the initial deal. And what drove Musk to make this all for now. A couple of other things almost certainly drove him to

do this now as opposed to two weeks ago. The first is just, you know, over the last couple of weeks, it has become clear that several of the defenses that Mr Musk was trying to put forward and those windows were starting to close a little bit. You know, his bought hunt that he was engaged in didn't seem like it was yielding the types of gross disparities between Twitter's

disclosures and what the data scientists were finding. That he could walk away because that was a material adverse effect that probably was also going to imperil some of the situations related to fraud. A lot of the earlier discovery motions dealt with communications back and forth, and seems pretty clear that Mr Musk was well aware of bought issues. In fact, that's why he was going to go into

this deal, and he was telling everyone about it. So I think a lot of the off ramps that he had kind of hoped he'd be able to get those windows started to narrow considerably, and it made it look more and more like, well, this may be a company

that I end up owning. When you combine that with the fact that a He's about to go into a deposition, that deposition was probably going to be excruciating long and possibly a little bit embarrassing, because there are a lot of claims that he or his lawyers had made that had been almost fully rebutted by other witnesses, and it's clear that he was going to be called and and may still be called on a lot of those inconsistencies, and you know that would be videoed and shown in court.

So I think that that going into that deposition there never fun, but this one was going to be a particularly unpleasant one, and then you finally combine it with the fact that if things are starting to shape up to look as though Mr Musk is now overwhelmingly likely that be owning Twitter. However, this thing settles how much more does he want to try to ncap this company? Because most of his defenses you pretty much boiled down

to saying Twitter is a terrible company. Who would want to buy it, who would want to own it, who would want to work for it, who would want to be a customer of it? And if that's going to be his booby prize at the end of the day, maybe he sort of thought it's best I stopped being sort of the saboteur and start being the booster of this company. And so it's not terribly surprising that at some point, well, once he real is that he's going to be trying to recruit people to stay, the employees

to stay, another investors to come in. That involves telling a positive story, not a negative story, and and the earlier he can pivot to doing that, perhaps the better. His offer was made with a proviso that the Delaware Chancery Court enter an immediate stay of Twitter's fight and adjourn the trial. His offer came with the proviso that there be an immediate stay of Twitter's legal fight and an a german of the trial. Twitter has not done that.

Is this a case of fool me once, Shame on you, fool me twice, shame on me, fool me three, four or five times, shame on Twitter. Well that was a nice try by Mr Boss, but quite frankly, you know, the imagery of Lucy holding the football and Charlie Brown running up to kick the football again I think is definitely in play here, right. The fact of the matter is that letter sort of says I am gonna undertake to agree to do what I've already agreed to do

in was trying to back out on. And so when you really read that letter closely, yes, it signals that he's had a change of heart, that he's willing to try to close this deal on its original terms. That's great news for Twitter, but it doesn't really put his money where his mouth is. It's conditioned on an immediate

stay of all proceedings and on the debt commitments closing. Well, you know, the fact of the matter is that doesn't really change any of the positions that he was in All it does is it signals that he's now more open to closing on these particular terms. So Twitter would be foolish if they said, Okay, now that you've signaled this relatively limp willingness to go forward, we should just put everything on hold, even though we're careening towards this

October seventeenth day. You know, if part of what was motivating him to issue this letter was sort of a fear of walking into that deposition room, well, if that's you know, has come to Jesus moment and deciding he's going to soften up on the steal, why would Twitter ever want to put on the brakes on their lawsuits. So if I'm Twitter's attorneys and it seems like this is what they've been doing, you know, you're telling your associates, no, you don't plan a trip to the Bahamas that week.

We're planning to go to trial and until and in less the ink is dry on a deal that's much more credible than the first one. We're not gonna let this slow down, you know, any or at least not very many parts of the schedule that we put in place to get us ready for trial. What happens next. Is the deposition going to go forward? Well, the deposition is scheduled to be on October six and seven, I think, and that is absolutely still in the books. Now, they

might push the deposition by a couple of days. It's conceivable they would, particularly if it's the queasy feeling about that deposition that is in fact um inducing a little bit of softening up with Mr Musk. That is probably gonna mean that other things get accelerated into its place, and that would give them maybe, you know, forty eight hours to try to work out whether they can get all of their box in a row to close the deal.

But you know, if they are negotiating in the background what this closed deal is going to look like, I would expect that Twitter is trying to make sure that there are concessions there that are a little bit more concrete than merely a repetition of the promise that he

made back in April to close the deal. So, for example, they might have him stipulate the various legal outcomes and essentially say I'm going to agree that the specific performance is in fact the right order here and concede my liability on the issue, or alternatively, they might say, Okay, if you want to go through this deal, it's going to take a few more days or weeks to get

things lined up. We would like you to immediately put enough cash and stock in other companies like Tesla and SpaceX into an escrow account so that if you try to back out on it, we don't have to try to haul you into court for a specific performance degree. We'll just have a judge attached that account and have it empty out to us and have that will kind

of put your money where your mouth is. So there are ways that they can try to put a few more teeth into this undertaking to close this deal at fifty cents, But I can't imagine that they would simply be happy to both delay and just reaffirm the the you know, all of the provisions as they are now.

They can't do too much to the deal to change it around, or else they're gonna have to go back and you know, issue new proxies to shareholders, get another shareholder vote, and you know, go back to the to the debt commitment letter and and and hope to get

a new one of those as well. So these will be mainly sort of um, you know, additions or writers to ensure prompt payment by Mr Musk uh and and adding on something like an escrow account or um an admission to liability wouldn't necessarily require changing the other terms of the agreement. What might the judge do to make sure that this deal happens before she decides to you know,

before she said, decides to cancel the trial. Well, typically, you know, when parties go into deep negotiations about a potential settlement, the judgment will give them a little bit of room to do it, but not infinite room to do it, because you know, chance McCormick is pretty savvy to this as well, that one of the part Mr Musk has been alleged to already have been engaged in

you know, stalling tactic in this litigation. So I think there's a sense in which the courts and Twitter would sort of say, okay, look, we'll give you enough room to see if we can negotiate a settlement of this deal, but not if all it really is is a pretext to put everything on hold. So I suspect that Chancellor McCormick will give them a little bit of leeway, particularly if they both show up saying we really think we're close to a deal, your honor, she might bump a

couple of the depositions. I doubt she's going to bump the trial date, quite frankly, because you know that's been set for months now, and you know, Chance McCormick is not the only case that she's hearing. She's scheduling all these other cases around it as well. So that week has been reserved and dedicated to this case, and I anticipate that it's going to be the matter that goes forward at time. You know that there are still pieces

to put together. One of the big wild cards in this case is whether suddenly the lenders in the deal, we're going to get cold feet and show up and say we're not willing to go forward, which then could throw things into even more chaos. So my guess is that these discussions aren't just between Twitter and Musk, but the lenders are in the room as well, just trying to make sure that every you know, all the remaining pieces that have to be put in place can be

put in place. Enough assurances can be given to Twitter that the deal will close and they can execute any additional paperwork that they need to make that happen. What else could happen to trip up the deal? Well, there still is this wild card about the lenders. Now, the lenders don't have a lot of outsum in this deal, but there is a set of dominoes that could fall

over if the lenders somehow legitimately back out. The most critical one is that if the lenders back out, while it doesn't forgive Musk entirely of his obligations, it would at least per the terms of the contract limit his liability to money damages, which is probably going to be

the termination fee of a billion dollars. So the lenders backing out for independent reasons, not goaded on or coached by Mr Musk, has always been kind of an interesting wild card in this situation, and there aren't too many outs that the lenders have, But it could well be that one of the things that is going to be you know, really critical for the lenders, and he is actually part of the deal itself, is that there has to be a solvency certificate that is issued for for Twitter,

that it's got to be assured that it's going to be solvent upon the closing of the deal, that it won't have liabilities and excessive assets or won't have cash flows that are incapable of meeting its debts. Someone's got to sign onto that, and weirdly enough, the entity that has to sign onto that solvency certificate is Elon Musk himself.

So there could be some kind of odd fun and games that take place in which Musque says, I don't think I can sign on to a solvency certificate, and therefore the banks are going to pull their lending, and therefore he doesn't have to close under the contract. I do think that there is a danger that if that happens, though, it's going to be perceived by Twitter and probably the judge is being a little bit too cute, see, So I have some reservations about whether they're even going to

try to go down that road. It is a theoretical possibility, so that might be something to keep our eyes out on. And the letter that Mr Musk sent about his offer to you know, come back to the table also says well, provided that the debt gets funded as well, So he has kind of worked in some wiggle rooms some margin

of error on that front as well. And it's something that you know, you kind of look at, you say, okay, this is a letter that has some concessions in it, but it is not yet the paragon of predictability that I think Twitter would want or the Judge Eric. Is it just coincidence that Musk was getting blowback for his peace plan proposal on Ukraine and then news breaks the next day that he's going forward with the Twitter deal.

I do think that there there, you know, have been, you know, in addition to a bunch of the other distractions, right um, Mr Musk's decision that he's going to engage in foreign policy initiatives for Ukraine being only one of them, but you know, some bad news for Tesla in terms

of their production numbers and so forth. I do think there's a sense that the number of other distractions have grown sufficiently large that maybe Mr Musk sort of thought, Okay, this was fun for a while, this was entertaining for a few months, but now I got other things on my plate, and you know what, I kind of see where this is going anyway, so I might as well

close this deal. I think you combine that with the fact that you know this was not destined to be a walk in the park, this deposition, I think there would be a lot of cringe worthy moments for Team Musk during this deposition of staments that are just outright inconsistent and by Twitter's account, just lies about what Mr Musk did and didn't do in his communications back in April. That no one really wants to have to sit through that squirm fest of a deposition, And thanks so much. Eric.

That's Eric Tally, a professor at Columbia Law School. Tom Barrick, the founder of Colony Capital and a close ally of Donald Trump, is on trial in Brooklyn for using his access to the former president to secretly help the United Arab Emirates to try to gain influence over American foreign policy. Prosecutors say that Barrick and his former assistant Matthew Grimes were the eyes and ears and voices of the u a E, providing the country with sensitive information and access

to the highest levels of US government. But the defense says Barrick was a globe trotting businessman who ran a forty billion dollar investment fund and called the prosecutions allegations that he was an illegal foreign agent nonsense. Joining me as Bloomberg Legal reporter Patricia Hurtado, who's covering the trial tell us what prosecutors are accusing Barrack of well. Tom Barrick is a longtime friend of Donald Trump's who acted

as one of his campaign finance guys in sixteen. The government alleges that during the run up to the election, as well as Trump's election as president, he and his former assistant gentleman named Matthew Grimes basically conspired to act as unregistered foreign agents for the government of the United Arab Emirates, and the allegations are that he agreed to do the U a e. S bidding to help influence the new presidency and the new the new administration, arranging

for meetings talking points. He denies it all. He said he was just a business fan doing his business. The government alleges he made money. According to the government, the Emirati Sovereign Wealth Funds later invested about three seventy four million into a fund and real estate projects he backed. So was there any formal agreement or anything that the government can point to to specifically show the agreement. No, which you have to do. And so if you are

acting as a foreign agent, it's a violation section. And according to this you're supposed to tell the US government that you're doing lobbying for the foreign country. The US says he failed to tell them that he never registered. Neither did Grimes. Meanwhile, they charged an Emirati who is now a fugitive, of acting as the point man basically for the United Arab Emirates in the US with Barrick and Grimes. And then the minute he understood that the

US was investigating, that he left the country. And what about barracks associate that's on trial. Yeah, he's his young assistant. He was twenty two when he started working for Barrick right out of Wharton, and he's accused of helping arranged these meetings and helping arrange these communicates. But his lawyer, Abby Lowell, has said he was just a gopher for Barrick, arranging for making sure he had his bosses smoothie every morning and the coffee was hot, and that the Colony

Capital private jet had the right food in it. So he was basically his assistant. Nothing more. So is the defense he didn't do it or he didn't get money for it, or what. It's both that he didn't do it, and if he got money, it was because of investments that were just separate and apart from any kind of activity.

Basically that he denies any wrongdoing. He denies being an unregistered foreign agent, he denies acting and lobbying on behalf of the United Arab Emirates, And in fact, he's argued that there were actually points where he was advocating for Cutter. There was a blockade to ends Cutter, and he was advocating for Cutter, which is another Gulf country which was violently opposed by the UAE and they were basically sworn enemies. So why would you support one country and then support

another country when their enemies? What would you say from the opening statements is the best piece of evidence the prosecution has. Well, I mean, the other thing that he's charged with is lying to the FBI about this investigation when they question him point blank. Now, a lot of the evidence has been alluded to, but it's under steal

because it's classified. So there's apparently information there that has been redacted half of the documents that get filed or blacked out, according to the defense, but they expect to call people in the former Trump administration to discuss that Trump and high ranking officials and the Trump administration were away error that Barrick was talking to the Emiratis and this was just the way they did business, and they were using Barrack because he was well known to them.

Because one of the arguments is that Trump gets elected as a businessman and a former reality TV sheet show host, right, so he doesn't have the traditional avenues of knowing who's going to be a former foreign policy advisor. You know, that can be a conduit to reaching the newly elected president. So he would still have to register as a foreign agent, though,

wouldn't he? Yeah, he would, And but I think the argument is if Trump maybe knew, and maybe high ranking members of the administration knew that this was being done, I guess there is an argument of plausible deniability as far as the defense is concerned, right, because if they knew, what's the problem here, and that perhaps another administration is seeing different because Trump is no longer in office. It seems like lying to the FBI is one of the

prosecution sort of fallbacks in these cases. And that's an easy case for the prosecution to make because the FBI usually has the answer is before they asked the questions. Yeah, but it's interesting because they're arguing the same defense Martha Stewart made, which is you guys didn't take notes. I mean you took notes by hand, but you didn't record it. How do you know you didn't write the questions down? How do we know that the answer was wrong when

you don't have the question? He answered, you know you have an answer, but you don't know what the question was. And so how's the jury supposed to infer the worst possible interpretation and take the worst inference? Well, we know that defense did not work for Martha Stewart. How is

jury selection? One of the interesting things that happened during jury selection is jurors were questioned closely about their feelings about Donald Trump himself and how closely they followed the sixteen campaign, and um, the judge actually asked prospective jurors how did they feel about Trump? Donald Trump himself and what would they think if he came in to testify

as a witness in this case. So that was extraordinarily unusual to hear that, especially at a time when we're having the Moral Lago investigation and whether or not, you know, the January six hearings are going on and what transpired there.

So it's it's quite interesting that there's some possibility that Donald Trump or high ranking members of his administration could be called in to testify, including Jared Kushner and possibly a former Secretary of State Rex Tillerson and um former Treasury Secretary Steve the Nuchin about what did Barracks say and what did you know about it? Did the judge let jurison who had any negative thoughts about Trump negative

feelings about Trump? For the most part, it was almost like if they were very discreet, they did not get kicked off the jury for cause. You know, there's peremptory challenges where both sides get to object to a certain

juror for whatever reason. They don't have to cause. But there are times when the judge could struke someone for prospective juror for cause if they seem to be they don't speak English, well, they're hard of hearing, they have a hardship for childcare, for example, or a job hardship, right, so they can't sit on a five week trial without losing income, which would be devastating to their household or

something like that. So there were people that were very articulate critics of President Trump, including prospective jurors that had said he was a crook. Now, those people got struck for cause immediately, or people who are very loquacious and talked at length about how closely they followed the election and that they wanted Hillary Clinton to win. They were

obviously candid, and they got struck for cause. But there were other people that said, oh, yeah, I closely follow of the election, but I didn't care about the outcome, which is kind of a head scratcher. Was like, are they not being forthcoming to tell you the truth about what they who they wanted to win. So sometimes those people were struck. There was one woman who said she was upset about the outcome of with Michigan Governor Gretchen

Whitmer's case. So immediately the government is raising a red flag, going, uh, this is a person who might believe in conspiracies and Q and on or whatever. So um, finally I think the government struck her. But so that's the kind of thing where the judge made the prosecutors sometimes use their peremptory challenges to people who might be stealth Republicans. So um, these are the same charges that former National Security Advisor Michael Flynn faced. This case was actually started out of

Mueller's investigation. It started there and then it ended up in main Justice, So started with a special prosecutor and then it went to main Justice and eventual late now it's in the Eastern District of New York with a Department of Justice component too, out of prosecutors. So how

many witnesses so far? Any interesting witnesses so far? There's been at this testimony from an expert and he's a professor of um Middle East studies basically, and he's talking about the history of all these countries and sovereign wealth funds, which to me was fascinating because he's talking about these

Gulf states who have principalities. They're run by sheikhs or princes or kingdoms, and they are oil rich and some of them, like the UAE United Arab Emirates, was interested in using soft power and they use their sovereign wealth funds, some of them with you know, unbelievable amounts of cash

behind them. One of the sovereign wealth funds has something like eight hundred billion dollars in assets, and they they do things like to win soft power and win good ill around the world, investing in things like sports teams like Arsenal or Manchester United UM. They built the United Arab Emirates built a stadium in downtown London based with

you know, for goodwill UM. You can also see the Saudias doing this with Live Golf, which has decided to invest and have UM golf tournaments, to the criticism of some people. So it was fascinating to me to hear this, you know, soft power influence and what they're trying to do UM to buy goodwill including also back in doubt chairs at universities for academic and research as well as

a think tanks. So fascinating to listen to. So this next week I think we're supposed to listen to more experts to set the ex stage of what was at stake, why would have done this and why the government thinks Barrick did this. You have the two defendants, they both have their own attorneys. Does their defense contradict each other in anyways? No, essentially a joint defense. And you know Grimes's defense lawyer showed jurors pictures of his client. He

apparently met Tom Barrick as a sixteen year old. He started a DJ business in Santa Barbara when he was fourteen and when he was sixteen, he got hired by Barrack's wife to be the DJ at Barrack's sons graduation party from eighth grade. So they have a picture from Grimes at that young tender age of sixteen. He's all of twenty nine now and he looks very young. So, uh yeah, they seem to have a joint defense. That seems to be, you know, working hand in glove together.

Thanks Patty. That's Patricia Hurtano, Bloomberg Legal Reporter, and that's it for this edition of The Bloomberg Law Show. Remember you can always get the latest legal news on our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify, and at www dot Bloomberg dot com, slash podcast Slash Law, and remember to tune in to The Bloomberg Law Show every week night at ten pm Wall Street Time. I'm June Grosso and you're listening to Bloomberg