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By Echo Wang
(Reuters) - Elon Musk's decision to accept some foreign investors as part of his $44 billion buyout of Twitter Inc runs the risk of inviting the kind of regulatory scrutiny over U.S. national security that social media peer TikTok faced, legal experts say.
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 government agencies and departments that reviews mergers and acquisitions for potential threats to U.S. 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.
A spokesperson for the U.S. Treasury Department, which chairs CFIUS, declined to comment on whether the national security panel planned to scrutinize Musk's Twitter deal.
Spokespeople for Musk, bin Talal, Qatar and Binance did not immediately respond to requests for comment.
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. His successor Joe Biden abandoned that effort after ByteDance agreed to changes on how the data of U.S. users are stored and protected.
The regulatory lawyers interviewed by Reuters said the risk of CFIUS blocking Musk's deal is small because he will control Twitter under the proposed takeover and the foreign investors are acquiring relatively small stakes.
They added that their assessment would change were Musk to give the foreign investors influence over the company, through a seat on its board or other means.
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's 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.