Still, Mr. Musk’s threat to leave could bring Twitter back to the negotiating table, allowing the billionaire to buy the company at a discount. The two sides can also settle with Mr. Musk who pays compensation to Twitter. Or he could pay a $ 1 billion breach fee and walk away, an option that is only allowed under certain circumstances, such as if Mr. Musk’s funding fell through.
If Mr. Musk succeeds in detaching himself from Twitter, it could be disastrous for the company. The stock has fallen more than 35 percent below his offer of $ 54.20 per share. Twitter’s business has also deteriorated in recent months. In May, Mr. Agrawal said in a note to employees that the company had not lived up to its business and financial goals.
Now that Twitter has sued, Musk and his lawyers are expected to respond. While the timeline beyond that depends on many factors, the company and Mr. Musk will most likely be called to a hearing in Delaware and go through the discovery process, with the two sides digging out facts they believe are relevant to the case.
The case can then be moved to a trial, although there is a chance that the judge assigned to the case will reject Mr. Musk’s attempt to go away. If the lawsuit goes to trial, the judge will decide whether Twitter’s revelations were insufficient and constituted a material injury to the agreement.
In the past, Delaware’s Chancery Court has prevented companies from trying to break agreements. In 2001, for example, when Tyson Foods tried to withdraw from an acquisition of meat packer IBP, the court ruled that Tyson had to comply with the agreement. In situations where the court has allowed buyers to go out, it has ordered them to pay compensation. In most readings of Twitter’s contract with Mr. Musk, the damage would be limited to $ 1 billion.
Twitter and Mr. Musk have teamed up with legal teams to remove it. Leading Twitter efforts in Delaware are William Savitt, an attorney at Wachtell, Lipton, Rosen & Katz. Wachtell Lipton is known for, among other things, developing legal tactics to protect companies from hostile buyers, such as the so-called poison pill that Twitter originally put in place to defend itself against Mr. Musk.