Elon Musk may be forced to pay up and complete his $44 billion buyouts of Twitter despite announcing his withdrawal from the deal, legal experts say.
Twitter Assembles a Legal Team to Fight Musk
Bloomberg reported on Sunday night, July 10, that Twitter had prepared a legal team to fight Musk. Among this team are prominent names in merger law, including Wachtell, Lipton, Rosen & Katz LLP. Wachtell Lipton, for example, is a leading law firm in Delaware with a rich background in defending companies that have been found in violation of fiduciary duty lawsuits and broken merger agreements. It is reported that Twitter will bring the lawsuit in Delaware, the US state with authority over the transaction, as soon as Monday.
The Tesla CEO said on Friday, July 8, that he is canceling the agreement, citing worries over the number of spam accounts on the social media site. Bret Taylor, Twitter's chairman, reacted with a tweet declaring that the business intended to press the merger deal through legal means.
According to Brian Quinn, an associate professor of law at Boston College, they will likely seek a court order requiring Musk to precisely meet his commitments under the agreement. The firm can seek a judge for "particular performance" under the terms of the agreement, which would oblige Musk to acquire the company for the $54.20 per share he committed to in April. Alternatively, the corporation might demand a $1 billion break fee from Musk for breaching the agreement by walking away from the project.
Quinn predicted that Musk's arguments would fail in court. Musk made three broad claims in his letter on Friday, July 8, such as Twitter violating the agreement by failing to provide enough information on spam accounts; Twitter misrepresenting the number of spam accounts in its disclosures to the US financial watchdog, and the company is violating the agreement by failing to consult with Musk when recently firing senior employees.
What Are Legal Experts Saying About Elon Musk's Chances?
Musk's information demands on spam accounts, according to Quinn, were not "reasonable" and would not be granted by the court. Musk, according to Quinn, cannot use unreasonable information demands to invent a violation and use it as an excuse to walk away from the contract.
According to John Coffee, a law expert at Columbia University, Musk's assertion that Twitter broke the agreement has a poor legal foundation. He noted that Twitter has reportedly provided Musk with all he requires, including responses to his question on the percentage of bots on the network.
Carl Tobias, Williams chair in law at the University of Richmond, said Musk's application does not give adequate support for his claim to cancel the transaction. Musk's counsel merely supports the claims and arguments. Musk wishes to make, but it is up to the judges to decide if Musk's evidence is genuine or convincing enough.
Tobias, on the other hand, said that both parties might agree to settle rather than wind up in a position in which Musk is forced to acquire a firm he no longer desires. Analysts have cautioned that a lengthy court fight might even harm Twitter's stock price and staff morale. A deal with Musk would put an end to the saga.
Analysts have suggested that Musk may use the legal battle to negotiate a lower price for Twitter, while investors are expected to explore legal action if the transaction falls through at $54.20 per share and sue for the difference between the sale price and the current stock price. Twitter is presently worth $36.81 per share.
