Twitter sues Elon Musk: Six ways the crazy takeover drama could end

Twitter sued Elon Musk on Tuesday in an attempt to force him to complete its $44 billion (43 billion euro) takeover, accusing the billionaire entrepreneur of “strange” actions and “bad faith” that havoc on the platform’s operations and share price.

The social media company filed a lawsuit in the Delaware Court of Chancery after Musk said last week that he was terminate its buyout offeralleging that Twitter failed to provide sufficient data on fake accounts or spam on the platform.

Musk suggested on Monday that he was preparing for a likely ugly legal battle, tweeting a four-frame meme of himself laughing, alongside lines that read, “They said I can’t buy Twitter. Then they wouldn’t release information about the bot. Now they want to force me to buy Twitter in court. Now they have to release the bot information to the court.”

The whole saga has left observers baffled by what Wedbush analyst Dan Ives described as “one of the craziest business stories of all time.”

So what are the possible outcomes, now that Musk wants out? Who could win the legal battle?

Scenario 1: The case ends in a clean break (yeah, that’s right)

The deal could end and Musk, the founder of electric car company Tesla, could pay the $1 billion (999 million euros) termination fee – pocket change for the richest man in town. the planet.

In theory, this would be the cleanest option for both parties.

However, Musk is unlikely to walk away that easily, according to Twitter attorneys and Ann Lipton, a law professor at Tulane University who specializes in corporate litigation.

Merger deals like this are “designed to keep buyers from getting cold feet and deciding they want to walk away,” Lipton said.

Musk, who also runs SpaceX, accused the social media giant of “false and misleading representations” about the number of fake accounts on the platformthat are essential to its business performance.

Musk’s attorneys also point to Twitter’s recent staff layoffs and hiring freeze, which they say violates the company’s obligation to continue operating as normal.

Those arguments may be valid, but they don’t deserve to be pulled out of the deal, Lipton says, calling them “finicky.”

“It’s not good enough unless he can show that the representations (on the fake accounts) are not only false, but also dramatically challenge the fundamentals of the agreement,” explains- she, adding that he “looks a lot like Musk legally.” Wrong”.

“Twitter had to endure months of chaos over this, Twitter shareholders expected a high price for their shares, and the company suffered public humiliation and denigration. In other words, if Musk doesn’t only pays the termination fee, he won,” Lipton told Euronews Next.

“So the question for court watchers is not just whether Twitter wins; it’s about whether the court goes all the way and asks Musk to close the deal.”

Scenario 2: Twitter wins in court, Musk buys the company

The arguments and evidence presented by Twitter are compelling and likely to get a receptive ear in the Delaware court, which doesn’t look favorably on sophisticated buyers with highly paid legal advisers who back out of deals, Brian Quinn said. , professor of law at Boston College.

“They make a very strong argument that it’s just buyer’s remorse,” Quinn said. “You have to eat your mistakes in the Delaware Chancery court. It’s going to work out very favorably for Twitter.”

Morningstar analyst Ali Mogharabi noted that Twitter has described its estimate of fake accounts and spam for years in regulatory filings while explicitly noting that the number may not be accurate given the use of samples from data and their interpretation.

Given current market conditions, Mogharabi said, Twitter may also have a strong case that the layoffs and layoffs of the past few weeks represent “a normal course of business.”

“Many tech companies have begun to control costs by reducing headcount and/or delaying hiring employees,” he noted. “Twitter employee resignations cannot be attributed with certainty to a change in the way Twitter operates since Musk’s offer was accepted by the board and shareholders.”

Quinn said Twitter has plenty of evidence — from its communications with Musk about whether to retain or fire employees, as well as the billionaire’s own public tweets — to dismiss his arguments for a takedown.

“They’re collecting a lot of tweets from Musk to hoist him on his own firecracker,” he said.

Scenario 3: Musk tries to renegotiate the price

The multibillionaire could also try to renegotiate his takeover of Twitter at a lower price.

This tactic was used successfully by global luxury giant LVMH two years ago, when the group broke a deal to acquire Tiffany before securing a discount.

However, experts don’t see how Musk and Twitter could agree on a different price at this point, given that the platform’s stock has lost more than a quarter of its value since late April.

Twitter shares closed at $34.06 (€33.94) on Tuesday, up 4.3% but still well below the $54.20 (€54.04) Musk agreed to pay for the ‘company.

This strongly suggests that Wall Street continues to have serious doubts about the continuation of the deal.

Scenario 4: Twitter and Musk agree to a deal

Legal experts say Twitter has a strong legal case against Musk, but may opt for a renegotiation or settlement instead of a lengthy legal battle.

“For Twitter, this fiasco is a nightmare scenario and will result in an Everest-like climb for Parag & Co. to navigate the myriad challenges ahead regarding employee turnover/morale, advertising headwinds , investor credibility around fake account/bot issues, and a host of other issues abound,” according to Wedbush analyst Ives.

“It’s going to be a long and ugly court battle,” he added.

Any legal proceedings are expected to take months, especially since Musk “will do anything to drag it out,” according to Lipton.

A settlement is “still possible, but at the moment they seem a long way off”, she told Euronews Next.

“Twitter has a strong legal position and few incentives to set up shop,” she added. However, “both have a lot to lose”.

Scenario 5: Musk wins in court

In the scenario where Musk wins in court, and if he manages to prove that Twitter provided him with “false and misleading” information – the main argument of his letter addressed to the platform Friday — and the true details have a material adverse effect on the business, he could walk away without having to pay severance pay.

Musk claimed Twitter failed to meet its contractual obligations after signing the merger agreement, saying the platform failed to provide enough details or evidence to show that its spam or fake accounts did not represent no more than 5% of all accounts, as estimated by the company. .

Musk’s lawyers also argue that Twitter failed to “seek and obtain consent before departing from its obligation to conduct business in the ordinary course” when firing several executives.

However, experts say that argument seems unlikely to determine the case one way or another.

Scenario 6: Musk changes his mind (again)

The eccentric billionaire could also have another twist.

Over the past few months, Musk has changed his mind several times: agreeing to join Twitter’s board, then deciding not to, putting the Twitter deal “on hold,” then revising Twitter’s funding. the deal and finally announcing that he doesn’t want to buy Twitter. more.

“Musk doesn’t seem at all interested in buying the company,” Lipton said.

“That may change as the litigation unfolds and both sides gain a new understanding of the strength of their relative positions – and the likely court decision.”

It also seems unlikely that another buyer will buy Twitter as there are currently no known buyers interested in owning the platform.