A report that tech billionaire Elon Musk paid a non-public settlement following claims of sexual misconduct from a flight attendant who labored on a non-public jet in 2016 is unlikely to have an effect on Musk’s deal to purchase Twitter, experts in company acquisitions stated Friday, after Musk’s critics known as for him to face penalties.
The news web site Insider reported Thursday that SpaceX had paid a flight attendant $250,000 in severance after she claimed he sexually harassed her whereas she was working. The web site, citing paperwork it says it obtained from a pal of the flight attendant, reported that the payout was contingent on the accuser not bringing future authorized motion.
NBC News has not confirmed the veracity of Insider’s reporting. SpaceX representatives didn’t instantly reply to a request for remark.
Musk denied the accusation in a sequence of posts on Twitter Thursday night and Friday morning, calling it “utterly untrue” and saying “it never happened.” He stated the Insider report was a “hit piece” designed “to interfere with the Twitter acquisition.”
Musk and Twitter’s board of administrators struck a deal final month to take the corporate personal in a deal valued at $44 billion, with Musk as the bulk proprietor. Musk, the world’s wealthiest particular person in line with Bloomberg News, stated he wished to purchase Twitter to make sure it stays dedicated to free speech and he proposed loosening its guidelines to go away up all tweets so long as they don’t break native legal guidelines.
There aren’t many examples of misconduct allegations in different high-profile company offers, nevertheless it’s clear that the reported accusation in opposition to Musk is unlikely to alter the thoughts of anybody concerned within the deliberate takeover of Twitter, professors at regulation faculties and enterprise faculties stated.
David Yoffie, a professor at Harvard Business School who teaches a course on technique and know-how, stated he believed the allegation would have “little or no effect” on Musk’s try and buy Twitter.
“Twitter’s board is highly unlikely to change its position, Musk’s equity backers are largely friends who are unlikely to back out, and it is unlikely to affect lenders,” Yoffie stated.
The Twitter deal isn’t ultimate and is anticipated to be accomplished later this yr, pending shareholder approval, financing and different hurdles. Musk and Twitter introduced the deal April 25.
It is theoretically doable however most unlikely that the allegation in opposition to Musk might trigger Twitter shareholders to reject the acquisition in their upcoming vote, stated Ann Lipton, a enterprise regulation professor and dean at Tulane University.
Musk has agreed to pay $54.20 a share, or 42 p.c greater than what Twitter shares had been promoting for Friday.
“If the shareholders decide, ‘I’d like my $54.20, but I don’t want to give my precious baby over to Elon Musk,’ then they can vote the deal down, but that would be a striking change from investor behavior historically,” Lipton stated.
Shareholders nearly by no means derail mergers and acquisitions. One evaluation of 1,620 offers between 1996 and 2017 discovered that shareholders rejected them in formal votes solely 5 occasions, or in 0.3 p.c of circumstances.
Twitter’s inventory closed at $38.29 a share Friday, up 2.7 p.c. The S&P 500 was flat.
Lipton agreed that the Twitter board was unlikely to stroll away from the deal. She stated that beneath state regulation in Delaware, the place Twitter is integrated, the board has an obligation to maximise shareholder wealth and it might face a shareholder lawsuit if it considers something however the worth Musk is prepared to pay.
Twitter didn’t instantly reply to a request for remark.
There have been circumstances the place allegations of government misconduct prompted a deal to collapse.
In 2002, after prosecutors accused Tyco International executives together with former CEO Dennis Kozlowski of utilizing $170 million in firm cash to throw events and purchase costly objects together with a $6,000 bathe curtain, two different firms that Tyco was in search of to accumulate walked away, stated Morgan Ricks, a regulation professor at Vanderbilt University who research mergers.
But there was a distinction in how these offers had been structured versus the Twitter deal: Tyco was shopping for the goal firms not with money however with shares in Tyco inventory, and people shares grew to become poisonous when the scandal broke, he stated.
“The target companies didn’t want the stock anymore,” Ricks stated. But now, Twitter shareholders are alleged to get the identical money regardless. “$54.20 is $54.20,” he stated.
In one other case, Microsoft started exploring a purchase order of recreation writer Activision Blizzard final yr after destructive protection of Activision’s CEO dented the share worth of the goal firm, making it a inexpensive deal.
Experts stated that Musk’s lenders and co-investors are unlikely to again off the deal, as a result of until there are extra allegations or stories of payouts, the report seemingly won’t issue into their estimation of Musk’s skill to show a revenue at Twitter.
“It’s not like we don’t know the dude’s history,” stated Lipton, citing allegations of sexual harassment at SpaceX and Tesla, two firms the place Musk is CEO. The accusation by the flight attendant is the one one in opposition to Musk personally.
“I can imagine a world where equity investors and lenders will be hesitant to loan money to someone who’s the subject of sexual harassment allegations, but that’s clearly not this world,” Lipton stated. “I don’t know that this additional allegation is going to be the straw where Morgan Stanley says, ‘Oh no, we’ve been wrong all along.’”
Morgan Stanley has agreed to lend $2 billion to the Twitter deal, greater than every other financial institution, the Financial Times reported this month. The financial institution didn’t instantly reply to a request for remark Friday.
The Twitter deal has already been a rollercoaster for buyers and Twitter customers. The broader inventory market plummeted in current weeks, making the deal much less financially engaging for Musk. He has since stated the deal is quickly on maintain and complained about Twitter’s dealing with of spam bots, whereas Twitter executives have stated it’s not on maintain.
“The banks backing out would probably be what Musk wants — and what Twitter does not want — at these valuations,” Ricks stated.