By Echo Wang

(Reuters). Elon Musk has decided to take on foreign investors during his $44 Billion buyout Twitter Inc Legal experts warn that (NYSE:) could face the same regulatory scrutiny as social media peer TikTok over U.S. security.

Musk announced on Thursday that Saudi Arabia’s Prince Alwaleed bin Talal (Qatar’s sovereign wealth fund) and Binance, Binance’s largest cryptocurrency exchange, both were part of the group of investors Musk has assembled to help fund his acquisition of Twitter.

According to six Reuters-interviewed regulatory lawyers, this may give the Committee on Foreign Investment in the United States (CFIUS), an opportunity to review the deal for national security concerns. CFIUS is an advisory panel made up of departments and agencies from government that examines mergers and acquisitions to determine whether they pose a threat to U.S. national 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.

The spokesperson of the U.S. Treasury Department (which chairs CFIUS) declined to comment whether or not the national security panel would examine Musk’s Twitter deal.

Representatives for Musk, Bin Talal, Qatar, and Binance didn’t immediately respond to inquiries for comment.

CFIUS was established by the Trump administration in 2020 to pressure TikTok’s Chinese parent ByteDance from selling its short video app. After ByteDance made changes to the way data is stored and protected, Joe Biden was appointed his successor.

Reuters spoke to regulatory attorneys who stated that Musk would control Twitter under his proposed takeover, and foreign investors will only acquire a small amount of Musk’s shares.

Musk giving foreign investors power over the company via a position on its board, or through other means would make their perceptions change.

However, this risk isn’t negligible considering that personal data handling by social media companies like Twitter can be considered critical infrastructure by CFIUS.

The non-public electronic communication is one item that can be considered to be sensitive personal information. This would apply to chat messages, email and messaging between users. Twitter allows you to do that,” law firm Vinson & Elkins LLP partner Richard Sofield said.

According to lawyers, CFIUS may be under scrutiny because of Musk’s business dealings in foreign countries that are hostile to free speech, or who want to take over the United States technology-wise. Tesla Inc (NASDAQ:) Inc is the leader of an electric car manufacturer. It relies on China to produce and sell its cars.

Although China banned Twitter in 2009, many Chinese officials were active on the social networking platform. Some have claimed that misinformation has been unfairly targeted by the company in its efforts to limit it.

Sofield stated that “One consideration would be whether there will be an opportunity China to leverage their business activity to achieve desired outcomes.”

BROADCOM PRÉCEDENT

The lawyers stated that there is precedent in which CFIUS could reject a deal because of the possibility that the acquirer’s business relationships might compromise them. After CFIUS raised concerns, Trump reversed his decision to block Broadcom’s acquisition of U.S. peer Qualcomm (NASDAQ 🙂 Inc) 2018 for $117 billion.

Broadcom, a public company that had U.S. shareholders and was headquartered out of Singapore was publicly traded. However, the White House was concerned that Broadcom’s relationships with foreign “third-party entities” could hinder the U.S. in the technology race against China.

Nevena Simidjiyska is a Fox Rothschild LLP regulatory lawyer who suggested that CFIUS might investigate whether foreign entities could influence the Twitter deal’s Musk and other U.S. investors.

Simidjiyska stated that CFIUS could decide that U.S.-based investors in Twitter are subject to CFIUS review, if controlled by foreign entities.

Musk’s Twitter deal does not face the most common type of regulatory risk seen in mergers and acquisitions — pushback from antitrust regulators. According to regulatory experts, the world’s wealthiest man does not have media holdings and they don’t expect that this deal will be subject to significant antitrust scrutiny.