Musk’s Twitter Purchase Includes $1 Billion Fee If Deal Falls Through

One day after the social media company's board backed Musk, the company submitted a filing to the Securities and Exchange Commission that said the deal would include a fee of $1 billion.

If the board cancels the purchase in order to sell the company to another buyer before the deal with Musk is closed, or if the board recommends its stockholders vote against the merger, the company will have to pay Musk $1 billion.

According to the filing, Musk will have to pay $1 billion if he doesn't follow the deal.

The filing states that stock grants will be vested until the deal is finalized, but any unvested stock awards will be canceled after that, and employees will be given cash when the stocks would have vested.

11 days after Musk made an initial offer, the board agreed to his final offer of $54.20-a-share. The purchase of Musk by Morgan Stanley will be financed by $21 billion in equity and $20 billion in loans. Less than two weeks later, Musk proposed buying the entire company, after he disclosed he had bought 9.2% of the company. The company initially tried to prevent a hostile takeover by having a poison pill plan in place, but later offered more details on how he intended to pay for the deal. The deal will deliver a substantial cash premium, and we believe it is the best path forward for the stockholders, according to the chairman.

The company's annual meeting of stockholders is scheduled for May 25 but it is not clear when shareholders will vote on the deal. At any time, shareholders can vote.