It seems like a common misunderstanding because the reporting around this is so bad.

> Musk and Twitter agreed to a so-called reverse termination fee of $1 billion when the two sides reached a deal last month. Still, the breakup fee isn’t an option payment that allows Musk to bail without consequence.

> A reverse breakup fee paid from a buyer to a target applies when there is an outside reason a deal can’t close, such as regulatory intermediation or third-party financing concerns. A buyer can also walk if there’s fraud, assuming the discovery of incorrect information has a so-called “material adverse effect.” A market dip, like the current sell-off that has caused Twitter to lose more than $9 billion in market cap, wouldn’t count as a valid reason for Musk to cut loose — breakup fee or no breakup fee — according to a senior M&A lawyer familiar with the matter.

https://www.cnbc.com/2022/05/13/elon-musk-cant-just-walk-awa...

What did I misunderstand?

Yes, I get that if there are 'material issues' maybe he can walk (even though he apparently waved a lot of that).

He can't just walk away for 'no reason' and not pay the fine.

The crashing price is probably not a legit reason.

No, it's worse than that.

He can't just walk away and _pay_ the fine.

He is obligated to close the deal and Twitter can force him to do so. If some external force stops the deal from happening - or if he can show that Twitter egregiously violated the agreement - he can get away with not buying Twitter, but he still has to pay them $1B.

Hey Zeus.

How could Musk possibly have done this, which must have been against the advice of his Bankers?

"I'm sending men to mars, ergo, I know more about M&A than i-bankers?

This is the kind of hubris that takes people down.

It would be perfectly fine terms if he actually wanted to buy Twitter - at a silly price but hey, it's his billions of dollars.

That's presumably what he told people and not "hey I'm just joking around, make sure to write the terms so the deal never actually completes"

Oh gosh, no, clearly they are bad terms. Deals don't happen for a lot reasons, o rational person would want to these terms understanding risk.

And it's doubtful Musk was so dumb he'd enter into this contract 'just for fun' knowing the terms.

I suggested he did want to buy it, got bad advice or didn't listen to his bankers, and then the market crashed, and now he's in a bind.

The point is that paying the ‘fine’ doesn’t give him the right to walk away for ‘no reason’. If he does he may end paying damages for much more than $1bn.