new York Elon Musk’s departure from his plans to take over the short message service Twitter leads to an open conflict. As announced, Twitter has now filed a lawsuit against the Tesla billionaire, as board chairman Bret Taylor announced on Tuesday. The tech group is asking Musk in court to implement the agreed takeover of the online service. The competent Delaware court may order the consummation of an acquisition. Twitter also expressly demands this in the 60-page lawsuit published by US media.
As early as Monday evening, Twitter’s lawyers finally switched to a confrontational course with a letter that was also submitted to the SEC. In the letter to Musk’s legal representative, the lawyers state that, from the company’s point of view, his termination of the deal was “invalid and unlawful.” Contrary to Musk’s claims, Twitter did not violate the acquisition agreement. By contrast, Musk’s withdrawal violated the agreement “knowingly, intentionally, willfully and materially.”
All agreements concluded so far remain in force, according to the lawyers at the major law firm Wachtell, Lipton, Rosen & Katz. The concluded contracts required “that Mr. Musk and the other Musk parties fulfill their obligations under the agreement (…) to make best efforts to complete the (…) proposed transaction.” Twitter will continue to be everyone provide information requested by Musk.
Twitter announced that it would go to court at the company’s official headquarters in the state of Delaware. There, the Delaware Chancery Court can also order the completion of a takeover. Musk announced on Friday that he was withdrawing from the agreement to buy Twitter for around $44 billion.
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Elon Musk accuses Twitter of a lack of transparency
Most recently, the Tesla boss was closed in the cause. He spoke up on Saturday a technology conference in Sun Valley, Idaho, where billionaires and CEOs from the tech and media world have been meeting for years. But a day after he dropped the Twitter deal, Musk held back on details, US media reports. Instead, he talked about his plans to populate Mars.
That doesn’t mean, however, that the subject of Twitter can be shelved. Musk’s lawyers accused the short message service on Friday of breaking several points of the acquisition agreement. Among other things, Twitter is said to have repeatedly sent insufficient data to Musk. After analyzing the existing data, Musk’s team apparently came to the conclusion that the number of so-called spam accounts was “significantly higher” than the approximately five percent that Twitter management assumes.
In addition, the lawyers complain about the many departures of key employees since Musk announced the takeover in April. That deviates from Twitter’s obligation to continue the business in a regulated manner. Musk is no longer bound by his purchase offer, they concluded.
But Musk could not get away that easily, predict legal experts. The board of directors of the social network has announced that it will force Musk into the $44 billion acquisition in court.
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
John Coffee, a professor at Columbia Law School in New York, estimates that the chances are good. “We’ll see if Elon Musk is above the law,” he told the Financial Times. However, he is confident “that the answer will be no. The laws are pretty clear that you can’t just pull out a takeover bid like he has in mind.”
Elon Musk faces fines of more than $1 billion
Twitter is in a good position to prove that they did provide Musk with the necessary information and that he was just looking for an excuse to end the deal, said Ann Lipton, a professor at Tulane Law School in New Orleans. As a result, Musk could have to pay significantly more than the agreed $1 billion fine if the takeover fails. Certain conditions must be met for this so-called “break-up fee”.
Since April, Musk’s financial conditions have deteriorated significantly. The 51-year-old is the richest man in the world with an estimated fortune of around $240 billion. But Tesla stock, which accounts for a large portion of his wealth, has lost around a quarter of its value since the Twitter deal was announced. Eventually, Musk had to sell a sizeable chunk of his Tesla stock to fund the deal.
Elon Musk scraps Twitter deal
The mood on the markets has also deteriorated significantly. The Twitter share, which Musk actually wanted to buy for $54.20 a share, currently only costs $36.81, and is falling. Wedbush Securities analyst Dan Ives expects Twitter stock to fall to $30 a share. That would be an enterprise value of $23 billion — $21 billion less than Musk originally intended to pay for it.
>>Read here: The richest man in the world commits public breach of contract – and battered his reputation
It remains to be seen whether there will actually be a showdown in court. “For Twitter to find itself in a Game of Thrones-style court battle with the richest person in the world isn’t exactly what the company envisioned when Musk made the takeover bid in April,” said analyst Ives.
After all, court cases can take years, which could deter employees and further weigh on the stock price. Therefore, according to experts, it is also conceivable that Musk and Twitter would agree on a higher fine out of court or renegotiate the purchase price.
Without Musk to buy, Twitter faces old, unresolved problems: “User growth is slowing. Ad revenue is still growing marginally,” writes Debra Aho Williamson, an analyst at Insider Intelligence. “But if the economy cools down, then that could result in reduced revenue across all social media.”
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