How Elon Musk may flip round his determined struggle towards Twitter

Elon Musk is angling to drive Twitter handy over a gaggle of key staff for questioning — and the authorized maneuver may very well be the mogul’s final and greatest hope in a determined struggle to scrap his $44 billion takeover deal. 

Twitter’s shares have rallied greater than 20% over the previous month to shut at $44.26 on Friday, indicating Wall Road is more and more assured Musk will probably be compelled to take over Twitter at what now appears like a stratospheric worth following a summer season rout in tech shares. The surging share worth has additionally diminished the potential of haggling down Twitter’s price ticket.

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Within the newest signal that Musk is making ready to pay up, the billionaire bought off $6.9 billion of Tesla shares earlier this month, which he admitted he did in “the (hopefully unlikely) occasion that Twitter forces this deal to shut *and* some fairness companions don’t come via.”  

However in a authorized gambit that Musk’s workforce hopes might flip the tide, his legal professionals on Tuesday accused Twitter of making an attempt to disguise which staff are answerable for evaluating spam accounts on the location — and requested Delaware Decide Kathaleen McCormick earlier on to drive Twitter to determine them for questioning, a supply near the case informed The Put up. 

The supply stated that McCormick is anticipated to reply to the request this week. 

If she sides with Musk, she would hand the mogul a much-needed victory, College of Iowa company finance and regulation chair Robert Miller informed The Put up. 

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Miller stated the technique should be a longshot, however that interviewing the staff is Musk’s greatest likelihood of proving his argument that Twitter knew it had an issue with bots and selected to cowl it up. If Musk is profitable, Twitter’s actions could be interpreted by a court docket as fraud and permit Musk to stroll away from the deal scot-free, Miller stated. 

Elon Musk has targeted his authorized technique on accusations that Twitter lined up an issue with bots.

“Elon should present that not solely is the pretend account quantity false, but in addition they knew it was false,” Miller stated. “If he wins on the fraud cost… the merger contract would not apply.” 

Miller stated McCormick is prone to grant Musk’s request as a result of not doing so might improve the chances her choice — if she guidelines towards Musk — would get overturned on enchantment. 

However J.B. Heaton, an funding researcher and ex-corporate legal professional, sees issues in a different way. He informed The Put up that Musk’s push to interview Twitter staff quantities to a “fishing expedition” — and that the mogul’s single-minded deal with bots has turned his case right into a “sluggish movement trainwreck.” 

“They’re doubling down on a nasty technique,” Heaton stated. “He acquired in, he acquired chilly toes and he determined, ‘I’m going to attempt to use bots as my difficulty.’ Nobody’s shopping for it.” 

As a substitute of creating the “colossal error” of spending their time arguing that Musk must be allowed to terminate the contract because of his issues about bots, the mogul’s legal professionals ought to settle for that the Delaware Courtroom of Chancery is sort of inevitably going to rule towards him and deal with minimizing the injury, Heaton stated. 

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They’d accomplish this by specializing in a provision within the contract that caps any termination price at $1 billion — a drop within the bucket in comparison with the $44 billion deal that Twitter desires the court docket to implement. In keeping with Heaton, Musk’s legal professionals ought to argue that Musk ought to pay the price and that forcing him to purchase the corporate — a measure often called particular efficiency — would “flip contract regulation on its head,” Heaton argued. 

Whereas that could be a extra convincing argument within the eyes of Decide McCormick and Delaware’s supreme court docket, it might additionally require Musk’s legal professionals to confront the billionaire who indicators their checks and inform him that his fundamental argument is a stinker. 

New Castle County Courthouse
Musks workforce requested Delaware Decide Kathaleen McCormick to drive Twitter to determine staff for questioning, a supply near the case informed The Put up.
Getty Photographs

“Litigation is a hotbed of extreme optimism,” Heaton stated, including that there could be a “excellent argument” to surrender on making an attempt to beat Twitter outright and as an alternative deal with controlling the injury.

Miller, nevertheless, sees that argument as a nonstarter. He stated that Musk ought to deal with arguing the bots difficulty as a result of if Delaware guidelines towards Musk, it’s nearly certain to order him to purchase the corporate via particular efficiency.

That chance makes Musk’s latest inventory gross sales “very rational,” Miller stated. 

“Elon promoting inventory tells me he plans to adjust to the court docket order if he loses,” he stated. 

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