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After three months of uncertainty and controversies, Elon Musk announced on Friday he is terminating the $44 billion deal to acquire Twitter. Musk cited a material breach of multiple provisions in the agreement. However, legal experts argue that he will have difficulty proving this in court.
Elon Musk surprised everyone three months ago when he made an offer to buy Twitter for $44 billion. Musk appeared to regret it almost immediately after signing the offer. He began stalling for time and looking for excuses to back out of the deal. Then, Musk started to attack the company’s top executives and board members, complaining about the number of bots on the platform and how he could not get insight into the issue.
Elon Musk’s lawyer team prepared a regulatory filing, saying he was terminating the Twitter deal because of a continuing disagreement over the number of spam accounts on the platform. Musk recently demanded that the social media platform prove that spam bots accounted for less than 5 percent of its total users, which Musk thinks Twitter failed to.
“Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement,” the filing said.
Musk’s deal with Twitter included a provision that the party breaking the agreement would have to pay a termination fee of $1 billion under certain circumstances should the deal fall apart. There’s a debate in the legal community whether the conflict over the spam bots is severe enough to allow Musk to walk away. A protracted legal battle will likely follow, and Musk might not be able to get away simply by paying the termination fee.
The merger agreement includes a specific provision that allows Twitter to force Musk to consummate the deal. This means Twitter could force Musk in court to complete the merger rather than win monetary compensation. Twitter executives are determined to force Musk into completing the deal, and chairman Bret Taylor clarified that.
“The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement,” wrote Taylor on Twitter. “We are confident we will prevail in the Delaware Court of Chancery.”
The Delaware Court of Chancery is well versed in quickly sorting merger-and-acquisition complexities. According to Automotive News, a verdict would come within a few months and usually involves a settlement to avoid further wrangling. Musk’s case is weak, many legal experts consider, and can only serve as a negotiating ploy. It is also highly plausible that Elon Musk is trying to sweeten the deal he negotiated three months ago.
Elon Musk’s lawyer team prepared a regulatory filing, saying he was terminating the Twitter deal because of a continuing disagreement over the number of spam accounts on the platform. Musk recently demanded that the social media platform prove that spam bots accounted for less than 5 percent of its total users, which Musk thinks Twitter failed to.
“Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement,” the filing said.
Musk’s deal with Twitter included a provision that the party breaking the agreement would have to pay a termination fee of $1 billion under certain circumstances should the deal fall apart. There’s a debate in the legal community whether the conflict over the spam bots is severe enough to allow Musk to walk away. A protracted legal battle will likely follow, and Musk might not be able to get away simply by paying the termination fee.
The merger agreement includes a specific provision that allows Twitter to force Musk to consummate the deal. This means Twitter could force Musk in court to complete the merger rather than win monetary compensation. Twitter executives are determined to force Musk into completing the deal, and chairman Bret Taylor clarified that.
“The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement,” wrote Taylor on Twitter. “We are confident we will prevail in the Delaware Court of Chancery.”
The Delaware Court of Chancery is well versed in quickly sorting merger-and-acquisition complexities. According to Automotive News, a verdict would come within a few months and usually involves a settlement to avoid further wrangling. Musk’s case is weak, many legal experts consider, and can only serve as a negotiating ploy. It is also highly plausible that Elon Musk is trying to sweeten the deal he negotiated three months ago.
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