Here’s the good, the bad, and the ugly that could come from the so-far botched deal.
Twitter has sued Elon Musk to force him to push through with his $44-billion deal to buy the company. This comes after the billionaire informed them that he wants to end the deal, according to a July 8 letter from a lawyer representing him.
READ ALSO: Second Thoughts: Here’s Why Elon Musk’s $44 Billion Twitter Deal Is On Hold
Board chairman Bret Taylor said the company has filed a lawsuit in the Delaware Court of Chancery to hold Elon Musk “accountable to his contractual obligations.”
Twitter has filed a lawsuit in the Delaware Court of Chancery to hold Elon Musk accountable to his contractual obligations.
— Bret Taylor (@btaylor) July 12, 2022
“The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery,” Taylor said.
The good
Following the lawsuit, Musk has alluded to “irony” in a Twitter post.
He then followed up with a meme mentioning how Twitter initially wouldn’t disclose bot info, but would now have to in court since it’s forcing him to continue the deal.
The chief executive officer of SpaceX and Tesla earlier announced on May 13 that the deal was temporarily on hold. This was pending further information on the social network’s spam or fake accounts.
Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of usershttps://t.co/Y2t0QMuuyn
— Elon Musk (@elonmusk) May 13, 2022
Although Musk agreed to pay $1 billion if he backs out from the deal, Taylor indicated that Twitter can simply hold him to continue the purchase.
“Twitter brings this action to enjoin Musk from further breaches, to compel Musk to fulfill his legal obligations, and to compel consummation of the merger upon satisfaction of the few outstanding conditions,” the complaint filed July 12 reads.
The bad
Lux Capital co-founder Josh Wolfe has meanwhile alleged that Musk only entered the Twitter deal as a cover to sell billions in Tesla stock. He calculated how Musk could end the deal with over $7 billion in liquidated stock, even after the $1-billion termination fee.
entire thing was clever ruse to
SELL + LIQUIDATE $8.5 BILLION of TESLA STOCK
(w/plausible excuse for doing it)80% odds Elon pays $1B breakup fee
+ walks away with $7.5B liquidated
20% spends $100M fighting litigationhonestly think he can “land rockets”
but can’t fix ‘bots’? https://t.co/HTyOM3V36B— Josh Wolfe (@wolfejosh) July 8, 2022
Twitter’s stock price has dropped since accepting Musk’s offer to buy the company at $54.20 per share. At the time of its April announcement, Twitter’s stock closed at $51.70 per share. By July 8, the stock ended the trading day at $36.81.
The Musk camp is well aware of this, as stated in their letter.
“Mr. Musk is also examining the company’s recent financial performance and revised outlook, and is considering whether the company’s declining business prospects and financial outlook constitute a Company Material Adverse Effect giving Mr. Musk a separate and distinct basis for terminating the Merger Agreement,” the letter read.
Twitter is also aware of this, based on their complaint.
“Musk refuses to honor his obligations to Twitter and its stockholders. Because the deal he signed no longer serves his personal interests. Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, Musk apparently believes that he…is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away,” the complaint read.
The ugly
Twitter has asked a Delaware court for a four-day trial in mid-September. This is in hopes of completing the deal by its “extremely limited and carefully circumscribed” deadline on October 24.
The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.
— Bret Taylor (@btaylor) July 8, 2022
If the court ultimately rules in Twitter’s favor and Musk resists, it can order Delaware-incorporated companies like Tesla—where the world’s richest man owns a stake—to freeze his assets or turn over shares.
Moreover, Twitter has requested “specific performance” from the said court, which has previously issued such orders.
The court, for instance, ordered Tyson Foods Inc. to complete its $3.2-billion deal for IBP Inc in 2001. Just last year, it ordered Kohlberg & Co LLC to close its $550-million deal with DecoPac Holding Inc.
The difference, however, is that these buyers were both companies. An individual buyer such as Musk is unprecedented, meaning the court has not previously granted specific performance for such cases.
Banner Photo by Justin Pacheco via Wikimedia Commons
