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Where Will This Saga Between Elon Musk and Twitter Go Next? A Conflict in the Courts

TechWhere Will This Saga Between Elon Musk and Twitter Go Next? A Conflict in the Courts

Having declared his intention to reject Twitter’s $44 billion acquisition offer, Elon Musk’s decision to abandon the deal might lead to an epic legal fight that could last months and cost both parties millions of dollars in costly litigation and high-stakes discussions.

The issue is whether or whether Mr. Musk can legally back out of his agreed-upon transaction and avoid paying a ten-figure penalty, or if he must stay with it.

According to most legal experts, Twitter has the upper hand since Mr. Musk’s agreement to purchase the firm has minimal restrictions attached and the company is keen to push the transaction through.

When it comes to impulsiveness and brinksmanship, Mr. Musk has an army of elite bankers and attorneys at his disposal. Twitter may be under pressure to avoid a public fight with the world’s wealthiest man and his devoted following by finding a diplomatic settlement that might protect the company’s independence but leave it in a precarious financial situation.

Musk’s lawyer, Skadden, Arps, Slate, Meagher & Flom partner Mike Ringler, announced late on Friday that his client was pulling out of the takeover bid on Twitter. Mr. Ringler represents Mr. Musk. A letter from Mr. Ringler said that Twitter had broken a promise it had made to Mr. Musk by failing to provide him with precise details on how it measures inauthentic accounts. Twitter has publicly given data regarding the number of its users, but Mr. Musk, according to him, does not think that they are phoney.

It was announced that Twitter will sue Elon Musk in Delaware chancery court if he didn’t complete the deal.

The provisions of Mr. Musk’s April merger deal with Twitter are at the centre of the argument. Twitter’s contract permits him to terminate the agreement by paying a $1 billion charge, but only if he loses debt funding. Twitter must also supply information that Elon Musk may need to finalise the sale, according to the agreement.

Twitter has been ordered by Mr. Musk to provide a full report of spam that has been posted on its site. Throughout the month of June, attorneys for both Elon Musk and Twitter fought over how much data to release in order to meet Mr. Musk’s requests.

There has been a dramatic decline in the value of technological businesses, including Tesla, which is owned by Mr. Musk and is his primary source of wealth. A attempt for response from Mr. Musk went unanswered.

Since it relies on private information like phone numbers and other digital indications to users’ identities to verify whether an account is fake, Twitter insists that its spam statistics are correct but refuses to reveal how it does it publicly. An official from Twitter would not say when the company expected to take legal action in order to implement the terms of the merger agreement.

David Larcker, a Stanford University professor of accounting and corporate governance, predicted the following outcome: “The court thinks Musk can walk away.” “Another result is that the court may enforce his completion of the arrangement. There may also be a price renegotiation in the middle ground.”

Mr. Musk’s acquisition is critical to Twitter’s long-term viability. A time when internet firms like Snap and Meta were experiencing high valuations because of increased advertising pressures, global economic instability, and inflation was when it made its arrangement with Mr. Musk. Mr. Musk’s selling price of $54.20 a share for Twitter has decreased by approximately 30 percent since the transaction was announced.

Several legal experts believe that Mr. Musk’s spat with Twitter over spam is an attempt to renegotiate Twitter’s pricing with him.

Due to the lack of a white knight alternative to Mr. Musk’s agreement, Twitter is likely to obtain the highest price possible.

As long as Mr. Musk’s financial funding is intact, Twitter has a “particular performance provision” that allows it to sue him and compel him to finish or pay for the acquisition. There have been instances of forced purchases in the past: As a result of IBP’s financial woes and accounting issues, Tyson Foods attempted to back out of its 2001 purchase of the meatpacker.

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