U.S. To Look Into Musk's Foreign Partners In Twitter Takeover

Elon Musk's decision to accept some foreign investors as part of his $44 billion buyout of Twitter Inc., runs the risk of regulatory scrutiny over US national security that social media peer TikTok faced, legal experts told Echo Wang and Alexandra Alper of Reuters.

Photo Insert: Saudi Arabia's Prince Alwaleed bin Talal

Musk disclosed on Thursday that Saudi Arabia's Prince Alwaleed bin Talal, Qatar's sovereign wealth fund, and Binance, the world's biggest cryptocurrency exchange founded by Chinese native Changpeng Zhao, were part of a group of investors that will help him fund the acquisition of Twitter.

This could give the Committee on Foreign Investment in the United States (CFIUS) an opening to scrutinize the deal for potential national security risks, six regulatory lawyers not involved in the transaction and interviewed by Reuters said.

CFIUS is a panel of agencies and departments that reviews mergers and acquisitions for threats to US security.

"To the extent that Musk's proposed acquisition of Twitter includes foreign investment, it very well could fall under CFIUS jurisdiction," said Chris Griner, chair of law firm Stroock & Stroock & Lavan LLP's national security practice.

Former President Donald Trump's administration turned to CFIUS in 2020 in a bid to force TikTok's Chinese parent ByteDance to divest the short video app. Lawyers interviewed by Reuters said the risk of CFIUS blocking Musk's deal is small because he will control Twitter under the takeover and foreign investors are acquiring relatively small stakes. Their view would change were Musk to give the foreign investors board seats.

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

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

CFIUS may also look into Musk's business dealings with foreign governments hostile to free speech or keen to overtake the US technologically. Tesla Inc. relies heavily on China to manufacture and sell its vehicles. There is precedent for CFIUS shooting down a deal based on the risk that an acquirer's business ties could compromise them.

Trump blocked chip maker Broadcom Inc.'s $117 billion purchase of Qualcomm in 2018 after CFIUS questioned the deal. The Singapore-based Broadcom had US shareholders but the White House fretted that Broadcom's relationship with "third-party foreign entities" would hinder the US in its tech race with China.

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