The WaPo wrote last Thursday regarding Elon Musk, Twitter, and national security. The headline says China’s “hold” over Tesla created a national security risk related to . . . Musk’s acquisition of Twitter. A “dozen current and former officials involved in reviewing foreign investments” said the deal should concern national security leaders. The insinuation is CFIUS should thus take action re Musk and Twitter.
My quick/hot take:
– The article reads like a giant non sequitur.
– Is it rational to assert that China, by virtue of its purported “influence” over Tesla, could force the world’s richest person (an American) to modify Twitter’s behavior or access personal data for the benefit of the CCP?
– While “potential Chinese influence over Tesla” may be hard to dispute (I think debatable), the inferential leap from there, to CCP influence over Musk himself, and then to a national security risk “arising from” (the standard) *the Twitter deal*, is a big stretch. (But it’s the suggestion of the first two graphs.)
– Notably, the vast majority of the dozen officials are either anonymous or not quoted (I’m not one of them).
– Yes, there’s a national security imperative re the supply chain for battery raw materials.
– Yes, CFIUS (and the USG more broadly) is “increasingly concerned with access to raw materials and protecting what’s left of battery manufacturing.”
– Yes, when CFIUS reviews a deal it conducts a “very thorough risk-based analysis regardless of how benign the transaction may appear.”
– Yes, sensitive personal data can pose national security risk depending on the scope, amount, type, etc. . . . that’s why FIRRMA gave the Committee new jurisdiction over some minority investments in this area.
– Re the statement that “regretting some deals in semiconductors and elsewhere, CFIUS has taken a more expansive view of its authority” . . . CFIUS doesn’t have a “regret” prong for jurisdiction.
– Yes, CFIUS has taken a more expansive view of its authority, especially for minority investments in tech companies, but that’s *because Congress through FIRRMA purposely gave them those authorities.*
– If a foreign person gains “control” over a U.S. business, or substantive influence over its operations, or access to personal data, then CFIUS generally could intervene.
– CFIUS asking questions doesn’t mean a review is under way or will happen. It FIRST needs jurisdiction, and if that’s absent, it’s not going to request a filing—not even to “flesh out national security issues.”
– The jurisdictional questions are about the control/influence of the *foreign investors,* not about Musk. His simple fix is to drop a problematic co-investor; find a new one.
– Re this anonymous comment (“In theory, could they mess up the whole deal? Absolutely.”), I’m confident CFIUS is engaged in good-faith, fact-based diligence (as I always witnessed). If this were politically driven, it would be out of character and profoundly disappointing.