Following the cancellation of his $44 billion (£37 billion) purchase of Twitter, Elon Musk took to the platform he no longer wishes to acquire and mocked its anticipated legal response.
“They want to compel me to acquire Twitter in court,” Musk tweeted to his 100 million followers. Despite Musk’s withdrawal in a dispute over the amount of spam or bot accounts on the site, Twitter has grounds to compel Musk to buy the company.
But, as usual, the case with the transaction, the world’s richest man appears to dismiss the threat. “Now they have to divulge bot info in court,” one caption in the tweet says, accompanied by a sequence of photographs of Musk laughing out loud. It was followed by a photo of Chuck Norris at a chessboard, with Musk tweeting beneath it, “Chuckmate.”
Constantly surrounded by the best advisers money can buy, Musk’s relationship with the legal details of his now-abandoned $44 billion Twitter takeover has been inconsistent. On the one end, his legal team has made vehement filings opposing the sale, citing numerous provisions in the agreement. On the other side, he sends poo emojis to the folks with whom he is negotiating.
Indeed, the scatological caricature aimed at Twitter CEO Parag Agrawal likely violated a merger deal that Musk has already broken. Musk struck a deal to buy the social networking site more than 2 months ago, which included a condition in which he promised not to “disparage” the firm or its employees.
A day later, Musk was criticizing Twitter employees, including Twitter’s legal chief, Vijaya Gadde. Dick Costolo, the former CEO of Twitter, blamed Musk for bullying Gadde.
It was the first indication that Musk was not taking the pact seriously, or was unwilling to limit his behavior as per the terms of the agreement. Given the condition in the contract and Musk’s recent activity on Twitter, it’s unlikely that Twitter was surprised. Musk agreed with the US Securities and Exchange Commission in 2018 over a tweet saying he had “financing secured” for a proposal to delist Tesla from the stock market.
Twitter stated in a letter recently that Musk’s cancellation of the deal was “invalid and unjust.” It pointed to the disparagement clause as one of the instances where Musk had broken the agreement.
Twitter has stated that it will seek legal action in Delaware, the US state with authority over the transaction, to “enforce the merger agreement.” It can seek a $1 billion break free from Elon or petition a judge for “specific performance,” which implies compelling Musk to proceed with the agreed-upon deal at $54.20 per share. Musk believes Twitter will go with the latter.
Musk looked sincere about purchasing the company when word of his bid leaked on the 14th of April, even though the $54.20 price tag suggested a cannabis joke, considering that “420” is slang for marijuana. The billionaire said he wished to unleash the platform’s “amazing potential” to promote free expression and democracy worldwide. “Having a tremendously trusted and broadly inclusive public forum is extremely important to the continuation of civilization,” he said at a TED conference.
Even when it became evident that Musk was leaving, he met with Twitter employees in a Q&A, saying he wanted the platform to build a “better, long-lasting civilization.” He was also interested in the firm enough to put together a funding package that comprised $13 billion from banks and a promise of more than $30 billion from his pocket, albeit with donations from the Binance cryptocurrency trading site and computer magnate Larry Ellison.
Nonetheless, his erratic behavior has some onlookers wondering how serious he was about purchasing the company. If he intended to buy the company from the start, a recent drop in tech stocks has influenced his decision, according to Drew Pascarella, a senior lecturer in finance at Cornell University.
“Elon is a daring and divisive public figure.” Twitter is a gold-standard social media channel that Elon has exploited controversially for years. “The ultimate boss move is the acquisition of the asset and the capacity to dominate it,” Drew says. “I believe Elon was serious, and the banks did as well.” Given what happened to share values after the deal signing, he risks looking quite foolish by paying what is now an absurd amount.”
Twitter shares slumped 11.3 percent in New York on Monday to $32.65, bringing their year-to-date decline to almost 23 percent. The tech-heavy Nasdaq index, which has plummeted 25 percent this year, indicates the whole market.
Musk’s attorneys are among the few legal experts who believe he has a shot in Delaware. His claim is based on Twitter’s quarterly filings, which state that spam accounts account for fewer than 5% of its daily active user base, which now stands at 229 million individuals. Twitter has regularly stated this since 2014 and has provided Musk with public tweet data to persuade him that their estimate is reliable.
Musk’s reasons for terminating the agreement are threefold: Twitter broke the deal by neglecting the request for information info on spam accounts; Twitter falsified the number of bots in its disclosure requirements to the US financial watchdog, and the company violated the agreement by failing to discuss with Musk when recently firing senior employees.
Quinn and others believe Musk will fail. “Does Musk have compelling legal arguments?” “In a nutshell, no,” Quinn responds. Uncomfortable with Musk’s argument, lawyers claim his information requests were unreasonable, that proving the spam estimate is fake is exceedingly unlikely, and that letting go of senior executives is part of the day-to-day operation of the company.
Nevertheless, some legal and corporate analysts predict both parties will strike an agreement to prevent a situation in which Musk is obliged to buy a firm he does not want while the company’s morale and share price suffer additional damage.
Whatever occurs now, anybody selling a business to Musk hereafter should tread carefully, according to Anat Alon-Beck, a Case Western Reserve University professor and commercial law expert. “I believe that his behavior will make it extremely hard to acquire additional companies,” she remarked.
However, Pascarella believes that when an entrepreneur with a $220 billion fortune comes calling, businesses will take note. “No board would ignore proposals from the world’s richest person just because of his bizarre behavior,” he said, adding that companies would need to “negotiate for explicit and powerful deal safeguards.”
Twitter is going to find out how strong its safeguards are. Meanwhile, Musk will undoubtedly continue to tweet on a platform he would rather use than own.
Twitter wants a lightning-speed trial, Musk is stalling till February.
Elon Musk’s legal team has requested the Delaware chancery court to deny Twitter’s “unjustifiable request” to expedite the trial of its lawsuit against the Tesla CEO to September.
In a 16-page response to Musk’s complaint about terminating his $44 billion acquisition of Twitter, the billionaire’s team of lawyers claims the case will go to trial in February of next year.
According to Musk’s lawyers, the bot account issue is evidence and expert-intensive and takes “considerable time” for inquiry and discovery.
“Twitter’s sudden call for breakneck speeds after two months of foot-dragging and disinformation is its latest ploy to cover up the truth about bots long enough to force defendants into closure,” according to the complaint.
The no-nonsense judge presiding over the hearing
Last year, Kathaleen McCormick became the first woman to serve as chancellor or head judge of the Court of Chancery. On Wednesday, she was handed the Twitter lawsuit, which aims to compel Musk to finish his acquisition of the social media site, and which threatens to be one of the most contentious court battles in years.
“She already has a proven record of not putting up with some of the worst behavior that we see in these sectors when individuals want to get out of contracts,” said Adam Badawi, a law professor at the University of California Berkeley who specializes in corporate governance. “She is a no-nonsense, serious judge.” In comparison to Musk’s abrasive and turbulent personality, she is recognized for being soft-spoken, personable, and friendly – but also for standing her ground. She pushes for litigants’ honesty and dignity at legal conferences.
“We’ve all had one another’s backs, we’ve always gone out for drinks after debates and preserved this level of politeness,” she said earlier this year at a gathering at the University of Delaware.
After weeks of combative tweets implying that Twitter was concealing the true number of false accounts, Musk announced on July 8 that he was canceling the $44 billion acquisition for $54.20 per Twitter share. The social media platform filed a lawsuit on Tuesday.
McCormick scheduled the first hearing in Wilmington for July 19, when she will evaluate Twitter’s petition to accelerate the case and hold a four-day trial in September.
According to legal experts and court records, judges have only ordered reluctant buyers to finalize corporate acquisitions a few times. McCormick was one of them.
Last year, McCormick drew the attention of Wall Street dealmakers when he directed an affiliate of private equity firm Kohlberg & Co LLC to complete its $550 million acquisition of cake decorating supplies company DecoPac Holding Inc.She described her decision as “a triumph for deal certainty,” and she rejected Kohlberg’s claims that the company would back out due to a lack of financing.
The case has numerous similarities to the Twitter transaction. Kohlberg, like Musk, stated that it was leaving since DecoPac breached the merger agreement. Kohlberg, like Musk, claimed that DecoPac was unable to sustain normal operations.
There are also distinctions. Musk’s offer is far larger, involves a publicly traded target firm in Twitter, and may have ramifications for Tesla Inc, the electric car maker that has provided Musk with much of his money.
In other situations, she has sided with shareholders when they have disagreed with management.
She stopped energy giant The Williams Cos Inc from implementing a so-called poison pill anti-takeover mechanism last year, claiming it violated their fiduciary obligation to shareholders.
She stated last month that Carvana Co shareholders might sue the board for a direct issue of stock to select investors when the share price was low during the early pandemic.
McCormick, a Notre Dame Law School graduate, began her legal career with the Delaware office of the Legal Aid Society, which assists low-income persons in navigating the court system.
She went into private practice “mostly for monetary reasons,” she told the Delaware Senate at her confirmation hearing and joined Young Conaway Stargatt & Taylor, one among several leading commercial litigation companies in the state.
She became the Court of Chancery’s first female president last year after joining as a vice chancellor in 2018.
Despite her demure demeanor, Eric Talley, a corporate law expert at Columbia Law School, believes Musk will not intimidate McCormick.
“I wouldn’t bet on Chancellor McCormick suddenly becoming weak at the knees,” he remarked.