The Elon Musk-Twitter Saga Now Moves to the Courts

The Elon Musk-Twitter Saga Now Moves to the Courts

Now that Elon Musk has signaled his intention. Get away from their $ 44 billion offer to buy TwitterThe fate of the influential social media network will be determined by what could be an epic court battle, involving months of costly litigation and high-level negotiations by elite lawyers on both sides.

The question is whether Mr Musk will be legally compelled to stick to his agreed acquisition or be allowed to return, possibly by paying a fine of 10.

Most legal experts say Twitter has the upper hand, partly because Mr Musk attached some cables to his deal to buy the company, and the company is determined to enforce the deal.

But Mr Musk enjoys indifference and rudeness and is backed by a fleet of top bankers and lawyers. Instead of engaging in a protracted public feud with the world’s richest man and his armies of hardliners, Twitter may be under pressure to find a quick and relatively peaceful solution – one that could maintain the company’s independence. But it could leave him in a weak financial position. Position

Mike Ringler, a partner at Skadden, Arps, Slate, Meagher & Flom, who is representing Mr. Musk, notified Twitter late Friday that his client was leaving the takeover. Mr Ringer argued in his letter that Twitter had breached the agreement with Mr Musk and did not provide him with detailed information on how he acted. Unauthorized accounts. He also said that Mr Musk did not believe in the matrix that Twitter had publicly revealed how many of its users were fake.

Twitter’s board responded by saying it aimed to achieve the acquisition and would sue Mr Musk in Delaware’s chancellor court to force him to do so.

At the heart of the controversy are the terms of a merger agreement Mr Musk struck with Twitter in April. His deal with Twitter allows him to break his contract by paying a 1 billion fee, but only in certain circumstances, such as losing loan financing. The agreement also requires Twitter to provide the data that Mr Musk may need to complete the transaction.

Mr Musk has called on Twitter to do a detailed account of spam on its platform. Throughout June, Mr. Musk and Twitter’s lawyers argued over how much data should be shared to meet Mr. Musk’s inquiries.

Mr Musk’s cool feet on the Twitter deal agreed with a huge slide in the prices of technology companies, including Tesla, the electric car company he runs, which is also a major source of his wealth. Mr Musk did not respond to a request for comment.

Twitter has maintained that its spam statistics are accurate, but has publicly declined to provide details on how it detects and counts spam accounts because it uses private information. Uses, such as users’ phone numbers and other digital indicators about their identities, to determine if an account is invalid. A Twitter spokesman declined to comment when Twitter planned to sue to enforce the merger agreement.

“The results are this: the court says the smile can go away,” said David Larker, a professor of accounting and corporate governance at Stanford University. “Another consequence is that she is forced to go through the agreement, and the court can enforce it. Or there may be a middle ground where the price can be renegotiated.”

For Twitter, it’s important for Mr. Musk to complete the sale. He struck a deal with Mr Musk as technology companies were enjoying promising prices. Some, like Snap and Meta, have now fallen. As they face advertising pressure, global economic downturn and rising inflation. Twitter’s stock has fallen nearly 30 percent since the deal was announced, and Mr Musk’s offer trades well under قیمت 54.20 per share.

Legal experts say Mr Musk’s spam controversy could be a ploy to force Twitter to return to the bargaining table in the hope of getting a lower price.

In the course of the deal, no other potential buyer emerged as Mr. Musk’s White Knight substitute, who refined his offer, which is likely to meet Twitter.

Twitter is Trump’s card “Specific performance clause“Which gives the company the right to sue Mr Musk and force him to complete or repay the contract, as long as the debt he has paid remains.” Forced Acquisitions Have Happened Before: In 2001, Tyson Foods tried to pull out of Matt Packer’s acquisition of IBP, citing IBP’s financial woes and accounting irregularities. The vice chancellor of a Delaware court ruled That Tyson had to complete the acquisition,

But legal authority is different from practical reality. Legal action may cost millions, it may take months to resolve and it will only add to the already uncertainty. Worried employees.

Dell disputes often end in a settlement or a renegotiation of the price. In 2020, luxury giant LVMH Moët Hennessy Louis Vuitton Tried to break his 16 16 billion deal. To get Tiffany & Company, finally got a discount of about $ 420 million.

“These things are a bargaining chip in economic transactions,” said Charles Elson, a recently retired professor of corporate governance at the University of Delaware. “It’s all about the money.”

The low price will benefit Mr Musk and his financial backers, especially when Twitter is in financial trouble. But Twitter has made it clear it wants to force Mr Musk to stick to its 44 44 billion offer.

The most damaging consequence for Twitter will be the breakdown of the deal. Mr Musk will need to show that Twitter has materially and intentionally violated the terms of his agreement, a high bar that recipients rarely meet. Mr Musk claimed that Twitter was withholding information needed to close the deal. It also argues that Twitter misreported its spam statistics, and that the misleading statistics covered up a serious problem with Twitter’s business.

One buyer has successfully argued in Delaware court only once that the material change in the target company’s business gives it the ability to opt out of the contract. This was followed in 2017 by the acquisition of ورن 3.7 billion by healthcare company Fresenius Cabe from the pharmaceutical company Acorn. After signing the Treaty of Fresenius, Acorn’s earnings plummeted and he was accused by a whistleblower of violating regulatory requirements.

Even if Twitter shows that it has not violated the merger agreement, the chancellor in a Delaware court may still allow Mr. Musk to pay damages and leave, as in Chemical in 2008. Apollo Global Management agreement with Huntsman and Hexion. (The cases ended on a broken contract and One billion dollar settlement.)

Forcing a recipient to buy a company is a complex process to oversee, and the chancellor may not order a buyer to do something he or she will not do in the end. The deal is tough, in Mr. Musk’s view. The habit of breaking legal boundaries.

“The worst case scenario for the court is that it makes an order and it doesn’t comply, and they have to figure out what to do about it,” said Morgan Ricks, a professor at Vanderbilt Law School.

While Mr. Musk generally relies on a small circle of trust to run his business, including rocket maker SpaceX, he has brought in a large legal team to oversee Twitter’s acquisitions. ۔ In addition to his personal lawyer, Alex Sparrow, he tapped lawyers for Squadron, Arps, Slate, Meghar and Flum.

Skadden is a leading corporate law firm with extensive experience in litigation before a Delaware court, including an attempt by LVMH to terminate Tiffany’s acquisition.

In addition, Twitter has hired lawyers for two firms, Wilson Sensoni Gadrich & Rosati and Simpson Thatcher & Bartlett – to handle the deal. Wilson Sonsoni is a longtime legal adviser to Twitter, which has built its reputation on deals in venture capital and technology. Simpson Thatcher is a New York-based law firm with extensive experience in general corporate integration and acquisitions.

If Twitter re-negotiates the price of its acquisition or accepts the breakup, it may face more legal issues. Shareholders will sue in any scenario, adding that Twitter is already facing acquisition issues, adding to the lawsuits of many shareholders. In April, financial analysts hailed Mr Musk’s offer as a low-key offer, and Twitter shareholders could back off if the company agreed to further reduce its acquisition price.

The breakup could also lead to additional legal scrutiny for Mr Musk. Securities and Exchange Commission Revealed In May, it was investigating Mr Musk’s purchase of Twitter stock and whether he had properly disclosed his shares and intentions for the social media company. In 2018, the regulator saved. ڈالر 40 million settlement Allegations by Mr Musk and Tesla that his tweet falsely claims to have funded Tesla’s privatization amount to a securities fraud.

“At the end of the day, the merger agreement is just a piece of paper. And a piece of paper can sue you if your buyer’s feet get cold,” said Ronald Rain, a retired merger and acquisition lawyer. Who worked for the Scuden Arps before representing Mr. Musk. “A lawsuit doesn’t give you a deal. It usually gives you a long headache. And a ruined company.”

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