Elon Musk may have to complete the $ 44 billion Twitter takeover, say legal experts Mergers and acquisitions

Elon Musk may be forced by a US court to complete his $ 44 billion takeover of Twitter, according to legal experts, despite withdrawing from the transaction.

The Tesla boss told Twitter on Friday that he was terminating the agreement, citing concerns about the number of spam accounts on the social media platform.

Twitter’s chairman, Bret Taylor, responded with a tweet that the company intended to “pursue legal action to enforce the merger agreement”[ads1];.

The Twitter Board is committed to terminating the transaction on the price and terms agreed with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will win in the Delaware Court of Chancery.

– Bret Taylor (@btaylor) July 8, 2022

A legal expert said he expected Twitter to file a lawsuit in Delaware, the US state that has jurisdiction over the deal, as soon as Monday.

“They will probably ask for a declaratory judgment that they do not break the contract. They will also ask for a court order that Musk specifically perform his obligations under the agreement,” said Brian Quinn, an associate professor at Boston College Law School.

Under the agreement, the company could ask a judge for “specific performance,” which would force Musk to buy the company for $ 54.20 per share he agreed to in April. Alternatively, the company could also claim a $ 1 billion break from Musk for breaching the agreement.

Quinn said Musk’s arguments would likely fail in court. In Friday’s letter, Musk put forward three broad arguments: that Twitter had broken the agreement by failing to provide enough information about spam accounts; that Twitter has misrepresented the number of spam accounts in its revelations to the US Treasury watchdog; and that the company broke the agreement by failing to consult with Musk by the dismissal of senior executives recently.

Quinn said Musk’s requests for information about spam accounts were not “reasonable” and would not be accepted by the court. “He cannot use unreasonable information requests to create a pretext for claiming a breach,” he said.

John Coffee, a law professor at Columbia University, said: “Musk is on a very weak legal footing. Twitter seems to have given him access to just about everything to satisfy his desire to know the percentage of robots among users.”

Carl Tobias, Williams’ legal counsel at the University of Richmond, said: “Musk’s submission does not appear to give him strong legal grounds to withdraw from the agreement. His lawyer has only made allegations and arguments for Musk’s position, and the judges will have to decide whether the evidence that Musk will present is convincing enough to support ending the deal. “

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Tobias added, however, that both sides can agree to take a settlement instead of ending up in a situation where Musk is required to buy a company he no longer wants. Analysts have warned that a lengthy legal battle could further hurt Twitter’s stock price and employee morale. A showdown with Musk would draw a line under the affair.

“Most similar disputes usually end with a settlement that allows plaintiffs and defendants to save face,” Tobias said.

Analysts have also speculated that Musk could use the legal battle to seek a lower price for Twitter, although investors are also expected to consider legal action if the deal does not go through to $ 54.20 per share and sue for the difference between the selling price and the price. . current share price. Twitter is currently trading at $ 36.81 per share.

“I doubt the court will decide before there is a settlement, and the daily price on Twitter will give you an idea of ​​what Musk’s side hopes to pay,” Coffee said.

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