Billionaire Elon Musk withdrew from $ 44 billion purchase deal on Friday twitterCiting ongoing disagreements regarding the number of spam accounts on the platform.
According to legal experts, Mask may want to end his bid on Twitter, but it’s not as easy as leaving. Instead, Mask can face a long battle with Twitter in court, which can take months to resolve.
Twitter’s board of directors is in a very difficult position, said Ann Lipton, a professor of corporate governance at Tlane Law School. “They just can’t say,’Okay, let’s not hurt us. Elon will force you to lower the price by $ 20 per share, or we’ll settle. Billion dollar breaks, which means Twitter isn’t in a position to do that. “
Doing so risks causing a proceeding by Twitter shareholders, she added. Twitter shareholders Already submitted A proceeding against the company and Elon Musk himself over a chaotic transaction.
According to Lipton, the merger deal is “very difficult to get out of,” and so far there seems to be insufficient evidence to support his claim that Twitter is lying about spam numbers.
Meanwhile, Twitter Chairman Bret Taylor has already promised that the company’s board will take legal action against Mask.
“The Twitter Board has promised to close the transaction at the price and terms agreed with Musk and will take legal action to enforce the merger agreement,” Taylor said in a tweet. ..
“We are confident that we will win the case in the Delaware State Court,” Taylor added, referring to the Delaware Court, which resolves disputes between businesses.
Musk has signed a legally binding contract During April Buy Twitter for $ 54.20 per share. The Agreement status If either party suspends the transaction, you will have to pay a $ 1 billion split fee.
Shortly after reaching an agreement, Musk began to imply that he was rethinking the deal. In May, Mask said he Decided to “hold” the acquisition of Twitter He appreciated the company’s claim that about 5% of monetizable daily active users (mDAUs) are spam accounts. Twitter continues to share information with Mask, he said. Turn the “fire hose” over A daily stream of tweets flowing through the platform.
In a letter on Friday, Musk’s lawyer accused Twitter of “serious breach of multiple terms” in the deal, and the company made “false misleading statements” about the spread of fake accounts on the platform. Claimed to have done.
“There are many reasons to doubt that. [Twitter] I made such a misrepresentation, but let’s assume it happened, that’s not really a reason to cancel the merger agreement, “Lipton said in an interview.
According to Lipton, in order for a “serious breach” of a contract to occur, Twitter needs to prove that it has made such a terrible false statement that it has a long-term impact on the company’s potential bottom line.
“He hasn’t yet given evidence that it is true,” she added.
According to Lipton, Twitter seems to have the upper hand as the trading drama goes to court. The merger agreement includes a “specific performance clause,” and Twitter states that as long as Musk is still in debt, he has the right to sue Musk and force the transaction.
In the next few days, Twitter will file a proceeding in Delaware, asking the judge to determine if it violates the terms of the contract, and then asks Musk to “fulfill the contractual obligations and complete the merger. Brian Quinn said he would order. Professor at Boston College Law School.
Later, Mr Quinn said he hoped the parties would continue discussions in court as part of the proceedings. “In the case of proceedings, it’s quick,” he added.
Adam Sterling, executive director of the Berkeley Center for Law and Business, told CNBC that Twitter has filed a strong proceeding, but Musk is not.
“He (Mask) has a lot of legal debate. I think he’s all in a suspicious position,” Sterling said, pointing out Friday’s submission of Mask. “(He) initially focused not only on bots on the platform, but also on company performance, so it’s like he’s throwing all these discussions there.”
Masks and Twitter may also reach reconciliation.
According to Lipton, Twitter may agree to a slight change in the transaction price of $ 54.20 per share to avoid the proceedings. It may not please Twitter shareholders who liked the first offer. The purchase price corresponds to the 38% premium of the company’s $ 39.31 closing price on April 1, 2022, which was the last trading day before Mr. Musk disclosed about 9% of the company’s shares. Twitter shares closed at $ 30.04 on Friday.
According to Lipton, it’s unclear what musk will settle for.
“I don’t know that Mask just wants to lower the price per share by $ 1 or $ 2,” she said. “I don’t think Musk wants this deal or a fairly dramatic price change, so I don’t think the two parties are nearing a settlement so far.”
“Because it’s designed to address these issues, Mask can follow through transactions, but it can complicate the process,” Sterling said. rice field. I haven’t seen any precedents of this scale or opponents like Elon Musk, so there are many questions about what he does. “
Jennifer Elias, CNBC’s technical reporter, contributed to this report.
