Musk’s Twitter acquisition is unlikely to be disrupted by a potential national security review, experts say | Techno Glob


Elon Musk bought Twitter last week and his plans to shape the company are unlikely to be derailed by a potential government review of the deal’s national security implications, experts tell Fox Business.

On Monday, Sen. Chris Murphy, D-Conn. asked the Committee on Foreign Investment in the United States (CFIUS) to review the deal because the new company would be partially owned by non-US entities. CFIUS, a multi-agency committee led by the Treasury Department, has the authority to block foreign ownership of critical US industries on national security grounds. Murphy called for a review of Musk’s acquisition of Twitter because the new company would give Saudi- and Qatari-backed interests about a 5% stake.

“As publicly reported, at least $1.89 billion in financing needed for Musk’s bid to take Twitter private was secured from members of the Saudi Arabian royal family,” Murphy said in a letter to CFIUS Chair and Treasury Secretary Janet Yellen on Monday. “Another $375 million came from the Kingdom of Qatar. Together, these stakes account for roughly 5% of Twitter’s new ownership.”

“Given Twitter’s important role in public communication, I am concerned about the potential influence of the government of Saudi Arabia,” Murphy wrote. “Any potential that foreign ownership of Twitter will increase censorship, misinformation, or political violence is a serious national security concern.”

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Twitter owner Elon Musk. (Getty Images/iStock/Getty Images)

However, lawyers specializing in CFIUS reviews said there are good reasons to think CFIUS will not stand in Musk’s way.

“It’s not something where I would have said the company needed to file [with CFIUS]From everything I’ve heard,” said Stewart Baker, who represented the Department of Homeland Security on CFIUS issues in the George W. Bush administration.

“I think it would be a stretch to say CFIUS has jurisdiction,” added John Kabealo, founder of Kabealo Law who has worked on thousands of CFIUS-related matters for clients.

For decades, CFIUS focused on critical national security industries, but with the 2018 legislation, CFIUS has a theoretical foundation on the Twitter merger. The 2018 law requires CFIUS to examine foreign ownership of a wide range of companies, including companies like Twitter that collect and hold data on more than 1 million Americans.

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CFIUS Chair and Treasury Secretary Janet Yellen. (AP/Associated Press via Tom Williams/Pool)

However, because Saudi’s ownership stake is so small, CFIUS must find that Musk has given Saudi some form of control, board seat or other special status that would give him a say in the company’s operations. Both attorneys said that without that, it would be difficult for CFIUS to exert any control over the terms of Musk’s new company.

“Five percent ownership plus board seats, observer status or some special access to information could trigger that,” Baker told Fox Business. “But there are no indications that… Musk is giving anything to anyone.”

Baker added that the Securities and Exchange Commission does not require disclosure of shareholdings below 5%, indicating that this ownership level is of little interest to US regulators. “This shouldn’t be a problem unless Saudis acquire exclusive rights to private Twitter data,” he said.

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“A foreign investor cannot be passive,” Cabello said. “They have to have some meaningful control. If it’s only 5% and he’s along for the ride without any meaningful rights, he’s a passive co-investor and [CFIUS] shall have no jurisdiction.”

Cabello added that his view of the transaction is that there is no clear information, at least publicly, that would compel CFIUS to take action. “With this high profile transaction, my experience suggests that if they saw something in the public report that they would have called upon if they were aware of their jurisdiction,” he said, there was no indication that CFIUS was.

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Tesla CEO Elon Musk attends the Offshore Northern Seas 2022 meeting on August 29, 2022 in Stavanger, Norway. (Photo by Carina Johansen / NTB / AFP/ Getty Images / Getty Images)

If CFIUS finds elements of the ownership structure that raise national security concerns, CFIUS may require the company to negotiate a national security agreement that addresses those concerns. CFIUS will have the final say on how to resolve the issue.

Both attorneys agreed that Murphy’s request was irrelevant to the process at CFIUS, because government officials routinely track transactions and decide on their own what warrants a national security review. Baker said Murphy’s letter was “irrelevant” to most of the process, while Cabello said it injects a dose of politics into what should be a politics-free field.

“It puts the committee in a bad spot,” Cabello said of Murphy’s letter. “They are expected to act independently of political interference.”

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CFIUS never discusses its activities and declined to comment on a Fox Business request for comment. Even when formal reviews are launched, CFIUS leaves it up to the parties involved to publicly discuss the results of those reviews.



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