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In today’s newsletter:
Elon Musk threatens to walk away from $44bn Twitter deal
LME hit by $450mn Elliott suit over nickel market chaos
Cravath opens first new office in almost three decades
Musk sets legal grounds to kill Twitter takeover
Here is the beauty of Twitter: (almost) anyone can say (almost) whatever they want. But self-proclaimed free speech warrior Elon Musk is learning that talk is cheap.
The Tesla chief is once again threatening to walk away from his $44bn acquisition of Twitter, less than two months after first announcing his bid to buy the social media platform.
According to Musk, Twitter has refused to provide information that proves less than 5 per cent of its monetisable daily active users are fake accounts or bots. But we’ve heard all of this before.
Elon Musk’s lawyers said that Twitter was “actively resisting and thwarting his information rights” and that this “clear material breach” would allow him to “terminate the merger agreement”.
The important part is this: “As Twitter’s prospective owner, Mr Musk is clearly entitled to the requested data to enable him to prepare for transitioning Twitter’s business to his ownership and to facilitate his transaction financing.”
This is a clever bit of manoeuvring from Musk. We explained previously how hard it was going to be for him to get out of this deal because of a watertight merger agreement that basically says Twitter can force him to go through with the transaction.
What Twitter can’t do is force Musk to go ahead with the deal if the banks (ie the institutions providing $13bn in financing) decide to walk away. He would just have to pay the $1bn termination fee, which is probably preferable to being forced to buy a company worth perhaps 27 per cent less than what Musk agreed to pay in April.
Where does this leave Twitter? The company insists that it will hold Musk to the original merger agreement. No prizes for guessing why. If the deal for some reason falls through, it’s very likely that Twitter’s share price will sink and other buyers will circle.
This saga has only been going on for seven weeks, though to us it feels like seven years. There is no indication from the banks that the financing is at risk, and this type of legal wrangling rarely works.
Anyway, this is all proving to be as crazy as we expected it to be. Here’s more from Lex.
Activist Elliott says LME violated its ‘human rights’
Things go from bad to worse at the London Metal Exchange and its parent company Hong Kong Exchange and Clearing.
Hedge fund Elliott Management is suing the 145-year-old exchange for $456mn for cancelling nickel trades after chaotic trading in early March following Russia’s invasion of Ukraine.
Elliott claims this was “unlawful on public law grounds” and constitutes a violation of its “human rights”.
Recall the price of nickel surged as much as 250 per cent across a couple of days in March amid a vicious short squeeze. That was caused by brokers and banks, including JPMorgan Chase, closing part of a large position amassed by Xiang Guangda, the billionaire founder of China’s leading stainless steel producer Tsingshan Holding Group.
The move by Elliott heaps further pressure on the LME as the Bank of England and the Financial Conduct Authority examine its handling of the crisis, one of the worst in its long history.
And further legal action could emerge from other funds that lost money when trades were cancelled. They have until Wednesday to follow Elliott’s lead and file judicial review claims.
The $456mn being claimed by Elliott is roughly equivalent to about 9,000 tonnes of nickel being sold at $50,000 a tonne — the price nickel was reset at after the trades were cancelled — rather than the peak of $100,000 it hit on March 8. Nickel is now trading at almost $29,000 a tonne.
The LME says that the claim is “without merit” and it will contest it “vigorously”. It has 21 days to file a response.
If the claim does go to trial it could shine a light on the decisions taken by the LME, which has said it wasn’t able to react earlier to the nickel price squeeze because it didn’t know just how much business was being done over the counter via derivatives.
To that end, it’s looking to push through a plan for more regular reporting of these positions in a major revamp of its rules.
US legal powerhouse looks to Washington
Cravath, Swaine & Moore is not known for taking big swings. But the 203-year-old law firm signalled on Monday it was ready to take a leap.
The firm is opening a new office in Washington with former leaders of the Federal Deposit Insurance Corporation and the US Securities and Exchange Commission in a bid to take on more government and regulatory work coming out of DC.
Cravath is out to advise clients on what it claims is an “increasingly complex and active regulatory environment” for big business that includes antitrust crackdowns under President Joe Biden’s regime and government probes. Former FDIC chair Jelena McWilliams will lead the new office.
It is a big change for a firm that has typically eschewed expansion in favour of Wall Street deals. Since opening in 1819, Cravath has stuck with just two offices, in London and New York.
But much is changing for the Manhattan-based firm. Although it remains one of Wall Street’s most influential advisers and still sets the pace for rivals when it comes to culture and pay, the existential threats are real.
In the past 12 months the firm has lost high-profile partners to Freshfields Bruckhaus Deringer including — most recently — M&A partner Jenny Hochenberg and corporate partner Damien Zoubek last year, defections that once would have seemed unthinkable. In response, presiding partner Faiza Saeed has moved to shake up its venerated “lockstep” pay structure, in which all partners of the same rank are paid the same.
Now the firm is getting on the front foot, having built up a bench of senior lawyers from federal agencies including the Federal Trade Commission and the Department of Justice’s antitrust division.
Tradition is well and good, but Cravath seems to be looking to the future.
Heidi Mayon has joined Simpson Thacher & Bartlett as a partner in its capital markets practice. She was previously at Goodwin Procter.
Linklaters has hired Andrew Gaines as a partner in its executive compensation and employee benefits practice. He joins from law firm Paul Weiss.
Law firm Weil Gotshal has hired Lois Deasey as a restructuring partner in London. He was formerly at Akin Gump.
M&C Saatchi abruptly removed its biggest shareholder Vin Murria from its board after the advertising group rejected her hostile takeover bid and agreed to an offer from Next Fifteen.
Houlihan Lokey has hired Howard Steinberg as a managing director to lead its tax restructuring practice. He joins from KPMG.
Buy now, pay later The ecommerce business that lets consumers split the cost of purchases over time boomed during the coronavirus pandemic. The FT explores whether the likes of Klarna can continue to thrive as interest rates climb higher and consumers face more difficult conditions.
Welchisms A new book arguing that former General Electric chief executive Jack Welch is responsible for destroying capitalism is drawing mixed reviews. Here are two perspectives from the Ink and from the New York Times.
Eye of the Tiger Here is a comprehensive look at the trouble that venture capital/hedge fund Tiger Global is in. After years of aggressive bets, Tiger’s returns are being vaporised, the Wall Street Journal reports.
Demand ‘falls off cliff’ for CFA financial analyst qualification (FT)
Big Tech pulls out all the stops to halt ‘self-preferencing’ antitrust bill (FT)
JetBlue sweetens bid for Spirit Airlines (WSJ)
Canadian pension fund makes $2.5bn bet on Dubai Ports (FT + Lex)
Saudi Arabia’s PIF will take a $185mn stake in Capital Bank of Jordan (BBG)
Value of US and European IPOs tumbles 90% this year (FT)
US lobbies UK to reconsider Chinese chip factory deal (WSJ)
Countryside/In-Cap: friendly capitalism goes hostile in pursuit of housebuilder (Lex)
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