Proclamations are one thing and contracts are another. The American businessman Elon Musk has appealed to the supposed defense of freedom of expression without any type of censorship as his main reason for buying Twitter. However, Musk himself has agreed to bite his tongue and limit his criticism of the social network in his tweets for the duration of the operation, according to the 73-page contract in which he signs his purchase of the company.
The contract, which was registered last night by the company before the Securities and Exchange Commission of the United States (the SEC, for its acronym in English), regulates communications about the purchase of Twitter, as is usual in this type of transaction. The general principle is that the two parties should consult and agree on press releases and other statements. What is unusual is the end of that contract clause: “The investor will be allowed [Elon Musk] publish tweets about the merger or the transactions contemplated in this agreement, provided that said tweets do not disparage the company or any of its representatives”.
Elon Musk is a compulsive user of the social network and has been broadcasting almost live his movements, from his initial purchase of a package of 9% to the final agreement, including the price of the offer (54.2 dollars per share, 44,000 million dollars in total, the equivalent of about 41,000 million euros), also announced in a tweet.
In recent weeks, Musk has gained more than five million followers on Twitter and already has 85.8 million. Until now, the tycoon had not avoided criticism of the social network and some of his managers or decisions.
By “free speech”, I simply mean that which matches the law.
I am against censorship that goes far beyond the law.
If people want less free speech, they will ask government to pass laws to that effect.
Therefore, going beyond the law is contrary to the will of the people.
— Elon Musk (@elonmusk) April 26, 2022
This same Tuesday, Elon Musk tweeted: “By ‘freedom of expression’ I simply mean what is in accordance with the law. I am against censorship that goes far beyond the law.” Or of the contract, I could add, since his companies have often required confidentiality agreements or have signed clauses with dismissed employees to avoid criticism that could discredit them and that keep him from being an “absolutist of freedom of expression”, as he is now defined. .
He knows in depth all the sides of the coin.
1,000 million for breaking the agreement
The Twitter purchase contract, registered by the company itself before the Washington-based supervisory body, does not clarify what happens if the richest man in the world ends up “disparaging” the company in his tweets, but it does specify that if the transaction breaks down, the culprit will have to pay the other party $1 billion.
This penalty works, therefore, in both directions. Musk will have to pay those 1,000 million dollars if he fails to close the financing to carry out the operation, for example, or if he backs down. On the contrary, it will be Twitter that will pay Musk that sum if he breaks the agreement and does not recommend shareholders vote in favor of the operation or if he ends up accepting an (unlikely) competing offer. The council vows not to actively seek another investor who outbids Musk.
The contract details the design of the operation, which will be done through the merger of Twitter with a newly created company with 10 dollars of capital in the state of Delaware, the most regulatory and fiscally lax in the United States and where it was also legally domiciled. the social network. The merger agreement must be voted on by the shareholders, but with this design Musk ensures that he controls 100% of the capital, regardless of the support he achieves at the meeting.
The contract gives until October 24 to close the operation, but that period can be extended for another six months. Investment banks Goldman Sachs and JP Morgan have already expressed to Twitter’s board of directors their opinion that the price offered by Musk is financially fair. When the operation becomes effective, the directors of Twitter will automatically cease in their positions and will be replaced by those of the company created by Musk. The directors will initially remain in their positions, until the new shareholder decides on the matter. Employee incentive plans in shares and options will be settled in cash.
It is also stated that Musk provides Tesla shares in sufficient quantity as collateral for part of the financing to buy the social network. In principle, Musk has loans of 13,000 million dollars backed by the assets of the purchased company, 12,500 million more pledged by part of his shares in Tesla and 21,000 million contributed by the investor himself, which is not clear how he will get.
Tesla, controlled and directed by Musk, collapsed on the stock market on Tuesday. It suffered a 12% drop, which gave a bite of 126,000 million in a single day to the value of the company and 32,000 million dollars to the package owned by Musk in a bad day for the Stock Exchanges. Among the reasons that analysts point out for this fall is precisely the fear that the tycoon will sell part of his shares to finance the purchase of Twitter.
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