Elon Musk is angling to drive Twitter handy over a bunch of key staff for questioning — and the authorized maneuver could possibly be the mogul’s final and greatest hope in a determined combat 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 shall be compelled to take over Twitter at what now appears to be like like a stratospheric worth following a summer season rout in tech shares. The surging share worth has additionally decreased the potential for haggling down Twitter’s price ticket.
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 may flip the tide, his legal professionals on Tuesday accused Twitter of making an attempt to cover which staff are chargeable 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 advised The Submit.
The supply stated that McCormick is predicted to answer the request this week.
If she sides with Musk, she would hand the mogul a much-needed victory, College of Iowa company finance and legislation chair Robert Miller advised The Submit.
Miller stated the technique should still be a longshot, however that interviewing the workers is Musk’s greatest probability 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 can be interpreted by a court docket as fraud and permit Musk to stroll away from the deal scot-free, Miller stated.
“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 more likely to grant Musk’s request as a result of not doing so may improve the chances her determination — if she guidelines towards Musk — would get overturned on enchantment.
However J.B. Heaton, an funding researcher and ex-corporate lawyer, sees issues otherwise. He advised The Submit that Musk’s push to interview Twitter staff quantities to a “fishing expedition” — and that the mogul’s single-minded give attention to bots has turned his case right into a “gradual movement trainwreck.”
“They’re doubling down on a foul technique,” Heaton stated. “He acquired in, he acquired chilly ft and he determined, ‘I’m going to attempt to use bots as my difficulty.’ Nobody’s shopping for it.”
As a substitute of constructing the “colossal error” of spending their time arguing that Musk ought to be allowed to terminate the contract on account of his considerations 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 give attention to minimizing the injury, Heaton stated.
They’d accomplish this by specializing in a provision within the contract that caps any termination payment at $1 billion — a drop within the bucket in comparison with the $44 billion deal that Twitter desires the court docket to implement. In accordance with Heaton, Musk’s legal professionals ought to argue that Musk ought to pay the payment and that forcing him to purchase the corporate — a measure often known as particular efficiency — would “flip contract legislation on its head,” Heaton argued.
Whereas that is perhaps 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 most important argument is a stinker.
“Litigation is a hotbed of extreme optimism,” Heaton stated, including that there can be a “superb argument” to surrender on making an attempt to beat Twitter outright and as an alternative give attention to controlling the injury.
Miller, nonetheless, sees that argument as a nonstarter. He stated that Musk ought to give attention to arguing the bots difficulty as a result of if Delaware guidelines towards Musk, it’s nearly positive to order him to purchase the corporate via particular efficiency.
That risk makes Musk’s current 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.