A US court may force Elon Musk to complete his $44 billion takeover of Twitter, according to legal experts, despite… pull the plug in the deal.
The Tesla CEO told Twitter on Friday that he had closed the deal, citing concerns about the number of spam accounts on the social media platform.
Twitter CEO Brett Taylor responded with a tweet saying the company intends to “follow the legal process to enforce the merger agreement.”
Twitter’s board is committed to closing the deal at the price and terms agreed with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident that we will prevail in Delaware court.
– Brett Taylor (@btaylor) July 8, 2022
One legal expert said he expects Twitter to file a lawsuit in Delaware, the US state that has jurisdiction over the deal, as soon as Monday.
“They will likely ask for a declaratory ruling that they are not in breach of the contract. They will also request a court order that Musk specifically perform his obligations under the agreement,” said Brian Quinn, assistant professor at Boston College of Law.
under Agreement Terms The company could ask a judge for a “specific performance,” which would force Musk to buy the company for $54.20 a share. He agreed in April. Alternatively, the company can also request a $1 billion break fee from Musk to walk away from the deal in contravention of the agreement.
Quinn said Musk’s arguments would likely fail in court. In a letter on Friday, Musk put forward three general arguments: that Twitter had violated the agreement by failing to provide sufficient information on spam accounts; that Twitter misrepresented the number of spam accounts in its disclosures to the US Financial Supervisory Authority; And that the company broke the agreement by not consulting with Musk when it recently fired senior employees.
Quinn said Musk’s information requests about spam accounts were not “reasonable” and would not be accepted by the court. “He cannot use unreasonable requests for information to create a pretext to claim a breach,” he said.
“Holding has very weak legal grounds,” said John Coffey, a professor of law at Columbia University. “Twitter seems to have given him access to just about everything to satisfy his desire to know the percentage of bots among its users.”
Carl Tobias, chair of law at Williams University of Richmond, said: “Mask’s presentation does not appear to give him strong legal reasons to walk away from the deal. His attorneys have only presented allegations and arguments for Musk’s position and the judges will have to decide whether the evidence Musk will present is persuasive enough to support End the deal.”
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However, Tobias added that both sides could agree to settle rather than end up in a situation where Musk is required to buy a company he no longer wants. Analysts have warned that a prolonged legal battle could further damage Twitter’s share price and employee morale. Compromising with Musk would draw a line under this issue.
“Most such disputes usually end in settlements that allow plaintiffs and defendants to save face,” Tobias said.
Analysts have also speculated that Musk may use the legal battle to get a lower price for Twitter, although investors are also expected to consider legal action if the deal at $54.20 per share fails and sue the difference between the sale price and the share price. The current share price. Twitter is currently trading at $36.81 a share.
“I doubt the court will rule before a settlement is reached, and the daily Twitter price will give you an idea of what Musk is hoping to pay,” Covey said.
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