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Elon Musk Could Struggle with Banks, His Twitter Deal Escape Hatch, Experts Say
The banks that agreed to finance Elon Musk’s $44 billion (roughly Rs. 3,37,465 crore) acquisition of Twitter have a financial incentive to help the world’s richest person walk away but would face long legal odds, according to people close to the deal and corporate law experts.
Twitter has sued Musk to force him to complete the transaction, dismissing his claim that the San Francisco-based company misled him about the number of spam accounts on its social media platform as buyer’s remorse in the wake of a plunge in technology stocks.
The Delaware Court of Chancery, where the dispute between the two sides is being litigated, has set a high bar for acquirers being allowed to abandon their deals, and most legal experts have said the arguments in the case favour Twitter.
Yet there is one scenario in which Musk would be allowed to abandon the acquisition by paying Twitter only a $1 billion (roughly Rs. 7,924 crore) break-up fee, according to the terms of their contract. His $13 billion (roughly Rs. 103 crore) bank financing for the deal would have to collapse.
Refusing to fund the deal would weigh on the banks’ reputation in the market for mergers and acquisitions as reliable sources of debt. However, the banks would have at least two reasons to help Musk get out of the acquisition, three sources close to the deal said.
The banks stand to earn lucrative fees from Musk’s business ventures such as electric car maker Tesla and space rocket company Space, provided they continue to curry favour with him.
They also face the prospect of hundreds of millions of dollars in losses if Musk is forced to complete the deal, the sources said. This is because, as with every big acquisition, the banks would have to sell the debt to get it off their books.
They would struggle to attract investors given the downturn in pockets of the debt market since the deal was signed in April, and the fact that Musk would be seen as an unwilling buyer of the company, the sources said. The banks would then face the prospect of selling the debt at a loss.
It is unclear whether the banks that agreed to finance the acquisition — Morgan Stanley, Bank of America, Barclays, Mitsubishi UFJ Financial Group, BNP Paribas, Mizuho Financial Group and Societe Generale — will attempt to get out of the deal.
The banks are waiting for the outcome of the legal dispute between Musk and Twitter before making any decisions, according to the sources. The trial is scheduled to start in October.
Spokespeople for Morgan Stanley, Bank of America, Barclays, Mitsubishi and Mizuho declined to comment, while BNP Paribas and Societe Generale did not immediately respond to requests for comment.
There is a catch to the banks serving as Musk’s escape hatch. He would have to show in court that the banks refused to deliver on their debt commitments despite his best efforts, according to the terms of his deal contact with Twitter.
This would be challenging to prove given Musk’s public statements against the deal as well as private communications between Musk and the banks that Twitter may uncover in its request for information, four corporate lawyers and professors interviewed by Reuters said.
“Musk would have to convince the judge he is not responsible for the bank financing falling through. That is hard to show, it would require a great degree of deftness from him and the banks,” said Columbia Law School professor Eric Talley.
Musk and Twitter representatives did not respond to requests for comment.
Huntsman precedent
Even if the banks can show they are not acting at Musk’s behest, they would find it difficult to get out of the Twitter deal, the legal experts said. They pointed to the case of chemical maker Hunstman, which in 2008 sued the banks that walked away from financing its $6.5 (roughly Rs. 500) sale to Hexion Specialty Chemicals.
Hexion, owned by private equity firm Apollo Global Management, abandoned the deal after Huntsman’s fortunes deteriorated, but a Delaware judge ruled that the transaction should go ahead. The two banks financing the deal, Credit Suisse Group AG and Deutsche Bank AG, then refused to fund it, arguing the combined company would be insolvent.
Huntsman sued the banks and, one week into the trial, they settled. The banks agreed to a $620 million (roughly Rs. 4,912 crore) cash payment and the provision of a $1.1 billion (roughly Rs. 8,716 crore) credit line to Hunstman, which had also secured earlier a $1 billion (roughly Rs. 7,924 crore) settlement payment from Apollo.
The banks balking at funding Musk’s deal would also have to show that Twitter would be insolvent if the acquisition happened, or that terms of their debt commitment were somehow breached, a high bar based on the deal documents that have been made public, the legal experts said.
“If the banks try to get out of the deal, they will walk into the same fight that Musk has taken on, where Twitter has the better legal arguments,” said Eleazer Klein, co-chair of law firm Schulte Roth & Zabel LLP’s mergers, acquisitions and securities group.
© Thomson Reuters 2022
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Catch the latest from the Consumer Electronics Show on Gadgets 360, at our CES 2023 hub.
YouTube will roll out a slew of artificial-intelligence-powered features for creators, the latest effort from parent company Alphabet to incorporate generative AI — technology that can create and synthesize text, images, music and other media given simple prompts — into its most important products and services.
Among the new products YouTube announced Thursday is a tool called Dream Screen that uses generative AI to add video or image backgrounds to short-form videos, which the company calls Shorts. It also announced new AI-enabled production tools to help with editing both short- and long-form videos on its platform.
“We’re unveiling a suite of products and features that will enable people to push the bounds of creative expression,” Toni Reid, YouTube’s vice president for community products, said in a blog post timed to the announcement Thursday. The Google-owned video platform first announced that it was developing the tools in March.
Google has been under pressure to show results and practical applications for its generative AI products. Some critics have been wary the company, which has long been seen as a leader in artificial intelligence, was falling behind upstarts like OpenAI or rival Microsoft, and that the products Google was rolling out weren’t yet ready for public consumption. OpenAI’s ChatGPT and a new Bing chatbot from Microsoft — which has invested $13 billion (nearly Rs. 1,08,100 crore) in OpenAI since 2019 — have been wildly popular and gained mainstream favour.
Over the past few months, Google launched its own ChatGPT competitor, Bard, and released a steady flow of updates to the product. It’s also incorporated experimental generative AI features into its most important services, including its flagship search engine, in what the company calls its experimental “search generative experience.” The product generates detailed summaries based on information it’s ingested from the internet and other digital sources in response to search queries.
The announcement of the new features also comes as YouTube is locked in fierce competition with ByteDance‘s TikTok and Meta Platforms‘s Instagram Reels to gain more share of the vertical, short-form video market. YouTube said it now sees more than 70 billion daily views on Shorts, and the new generative AI tools appear to be aimed at attracting even more users and creators and gaining a competitive edge over its rivals.
The company also announced YouTube Create, a mobile app aimed at helping the platform’s creators make video production work easier. The app includes AI-enabled features like editing and trimming, automatic captioning, voiceover capabilities and access to a library of filters and royalty-free music. The app is currently in beta on Android in “select markets,” the company said, and will be free of charge.
Beyond creation, YouTube said it would also provide creators with more tools to get AI-powered insights, help with automatic dubbing of videos and assist with finding music and soundtracks for videos.
© 2023 Bloomberg LP
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WhatsApp has begun rolling out support for a new feature that will allow you to log in to your account using the biometric authentication mechanism on your smartphone. The messaging service will soon allow you to create a passkey — a kind of login credential that eliminates the need to use or remember a password — on your device and use it to securely log in to apps and services using the facial recognition or fingerprint scanner on your device.
Feature tracker WABetaInfo spotted the new passkey feature on WhatsApp beta for Android 2.23.20.4 on Tuesday, that is rolling out to beta users. However, not all users who have updated to the latest beta release will have access to the feature, which is reportedly rolling out to a “limited number of beta testers”. Gadgets 360 was unable to access the feature on two different Android smartphones that are both enrolled in the beta program.
The new Passkeys feature on WhatsApp
Photo Credit: WABetaInfo
The new passkey feature is described as a “simple way to sign in safely” to WhatsApp in a screenshot shared by the feature tracker. This suggests that it could be used to help sign in to other devices via secure authentication on your primary device.
Authenticating using passkeys isn’t a novel concept and the technology is slowly gaining traction online— Google already allows you to log in to a new device by using fingerprint-based biometric authentication for passkeys in place of a password. These passkeys are securely stored on your device and used when biometric authentication is provided.
The screenshot posted by WABetaInfo also states that WhatsApp will store the passkey in the device’s password manager — for most users, that would be the device’s default password store that is handled by Google with autofill support. The feature is also expected to make its way to iOS, where it is likely to be stored in the iOS Keychain.
It is currently unclear whether WhatsApp will also support storing passkeys in third-party apps like Bitwarden, 1Password, or Dashlane. We can expect to learn more about how the feature works when it is rolled out to more users in the beta program and the feature is expected to arrive on all smartphones on the stable channel in the future.
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Britain urged Meta not to roll out end-to-end encryption on Instagram and Facebook Messenger without safety measures to protect children from sexual abuse after the Online Safety Bill was passed by parliament.
Meta, which already encrypts messages on WhatsApp, plans to implement end-to-end encryption across Messenger and Instagram direct messages, saying the technology re-enforced safety and security.
Britain’s Home Secretary Suella Braverman said she supported strong encryption for online users but it could not come at the expense of children’s safety.
“Meta has failed to provide assurances that they will keep their platforms safe from sickening abusers,” she said. “They must develop appropriate safeguards to sit alongside their plans for end-to-end encryption.”
A Meta spokesperson said: “The overwhelming majority of Brits already rely on apps that use encryption to keep them safe from hackers, fraudsters and criminals.
“We don’t think people want us reading their private messages so have spent the last five years developing robust safety measures to prevent, detect and combat abuse while maintaining online security.”
It said it would update on Wednesday on the measures it was taking, such as restricting people over 19 from messaging teens who do not follow them and using technology to identify and take action against malicious behaviour.
“As we roll out end-to-end encryption, we expect to continue providing more reports to law enforcement than our peers due to our industry leading work on keeping people safe,” the spokesperson said.
Social media platforms will face tougher requirements to protect children from accessing harmful content when the Online Safety Bill passed by Parliament on Tuesday becomes law.
End-to-end encryption is a bone of contention between companies and the government in the new law.
Messaging platforms led by WhatsApp oppose a provision that they say could force them to break end-to-end encryption.
The government, however, has said the bill does not ban the technology, but instead, it requires companies to take action to stop child abuse and as a last resort develop technology to scan encrypted messages.
Tech companies have said scanning messages and end-to-end encryption are fundamentally incompatible.
© Thomson Reuters 2023
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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