Elon Musk’s latest $7 billion Twitter funding could face US regulatory scrutiny: Experts

Elon Musk’s decision to accept certain foreign investors as part of his Twitter buyout for $44 billion (about Rs 3,37,000 crore) runs the risk of inviting regulatory scrutiny over US national security, legal experts say. , which faced social media peer TikTok, say legal experts. ,

musk disclosed on Thursday that Saudi Arabia’s Prince Alwaleed bin Talal, Qatar’s Sovereign Wealth Fund and Binanceworld’s largest cryptocurrency The exchange, founded by Chinese-born Changpeng Zhao, was part of a group of investors that would help fund the acquisition of Twitter,

This could give the Committee on Foreign Investment in the United States (CFIUS) an opportunity to examine the deal for potential national security risks, six regulatory lawyers not involved in the transaction and interviewed by Reuters said. The CFIUS is a panel of government agencies and departments that review mergers and acquisitions for potential threats to US security.

“While Twitter’s proposed acquisition of Musk involves foreign investment, it could very well fall under CFIUS jurisdiction,” said Chris Griner, president of national security practice at law firm Stroke & Stroke & Lavan LLP.

A spokesman for the US Treasury Department, which chairs CFIUS, declined to comment on whether a national security panel planned to investigate Musk’s Twitter deal.

Spokesmen for Musk, Bin Talal, Qatar and Binance did not immediately respond to requests for comment.

Former President Donald Trump’s administration turns to CFIUS in 2020 to force of tiktok chinese parents ByteDance To sell short videos app. His successor, Joe Biden, abandoned that effort when ByteDance agreed to changes to the way it stores and protects US users’ data.

Regulatory lawyers interviewed by Reuters said the risk of CFIUS blocking Musk’s deal is small because he would control Twitter under the proposed acquisition and foreign investors are acquiring a relatively small portion.

He said his assessment would change Musk to give foreign investors influence over the company, through a seat on its board or by other means.

However, the risk is not negligible, given that the business of handling personal data by social media companies such as Twitter is generally viewed by CFIUS as critical infrastructure, the lawyers said.

“One item that is considered sensitive personal data is non-public electronic communications. So it would be email, messaging or chat communications between users. Twitter allows you to do that,” said Richard Richard, partner at law firm Vinson & Elkins LLP Sofield said.

One area of ​​potential investigation for CFIUS, the lawyers said, could be Musk’s business dealings with foreign governments that are hostile to free speech or eager to overtake the United States technically. TeslaThe electric car maker he leads relies heavily on China, for example, to manufacture and sell its vehicles.

China blocked Twitter in 2009 but many Chinese officials are active on the social media platform. Some of them have complained that the company’s efforts to restrict misinformation have unfairly targeted them.

“One consideration will be whether China will have the opportunity to leverage its commercial activity to achieve the desired results,” Sofield said.

broadcom example

Lawyers said CFIUS has a precedent for shooting a deal based on the risk that an acquirer’s business relationship could compromise them. Trump blocks chip maker broadcom US peer acquisition for $117 billion (approximately Rs 8,99,595 crore) Qualcomm After 2018 the CFIUS raised concerns about the deal.

Broadcom was a publicly listed company with US shareholders headquartered in Singapore, but the White House said Broadcom’s ties with “third-party foreign entities” would set the US back in the technology race with China.

Nevena Simidjiska, a regulatory attorney at law firm Fox Rothschild LLP, said it is possible that CFIUS will look into whether Musk or other US investors in the Twitter deal could be influenced by similarly foreign entities.

“CFIUS may determine that US investors in Twitter are also subject to CFIUS review if they are controlled by foreign parties,” Simidjiska said.

Musk’s Twitter deal doesn’t face the most common type of regulatory risk seen in mergers and acquisitions — pushback from antitrust regulators. The world’s richest man has no media holdings, and regulatory experts have said they do not expect the deal to face significant antitrust scrutiny.

© Thomson Reuters 2022

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