Elon Musk may be preparing for the next chapter of his Twitter acquisition journey: the court.
In April, a $ 44 billion deal was reached between Mr. Musk and Twitter, and since then both parties have worked to close the deal. Mr. Musk asked for information on how many Twitter accounts are robots, and Twitter has provided him with access to his “fire sleeve” or stream of tweets. She has continued to share additional information with him.
On Thursday, The Washington Post reported that the deal was in jeopardy and that Mr. Musk would take potentially drastic measures. The claims in the article, which could not be confirmed by the DealBook newsletter, surprised Twitter and its advisers, because they did not consider the deal to be in danger more than at any other time in recent months.
Mr. Musk did not respond to a request for comment. Twitter reiterated that it intended to “close the transaction and enforce the merger agreement at the agreed price and conditions.”
There are many “drastic” actions that Mr. Musk, but as for the deal, there are two clear possibilities: he could deliver a letter on Twitter saying he is finalizing the deal and he could sue Twitter. These two actions are likely to occur simultaneously, but not necessarily.
There are no clear reasons why Mr. Musk is trying to break the deal, because Twitter has publicly revealed that about 5 percent of its users are robots since it was made public. But you can try to claim that this disclosure is intentionally misleading, a very high level that must be legally complied with.
In that case, Twitter could counterclaim. Twitter firmly believes that the deal deal is on its side and that it would be a tough battle for Mr. Musk. The agreement has a “specific execution clause,” which gives the company the right to sue it and force it to complete the agreement as long as the debt financing it has granted remains intact. And even if this 5 percent estimate is turned off, Twitter warns in its regulatory documents that the figure is an estimate and that “it could be higher than we currently estimate.” The bar to use it as a reason to leave a deal is high.
A case could be heard in Delaware, where Twitter is registered. Twitter would almost certainly look for an accelerated case, given the size of the deal. A possible judge is Chancellor Kathaleen St. J. McCormick, who also oversees the demand of the Orlando Police Pension Fund for the agreement.
The stakes are high. The most valuable part of Twitter right now is its acquisition agreement with Mr. Musk. Its shares have fallen about 24 percent since April and are trading well below the price agreed with Mr. Musk. Shares of Twitter fell 4 percent in pre-market trading on Friday.
Twitter is seeing pressure on its advertising business, it has frozen recruitment and is firing some staff members. Accept less than the price you originally negotiated with Mr. Musk could expose Twitter to shareholder demands. Thus, while litigation can be costly, losing the agreement can be even worse.