Elon Musk is angling to pressure Twitter handy over a bunch of key workers for questioning — and the authorized maneuver may very well be the mogul’s final and finest hope in a determined battle 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 Avenue is more and more assured Musk might be compelled to take over Twitter at what now seems to be like a stratospheric worth following a summer season rout in tech shares. The surging share worth has additionally lowered 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 by means of.”
However in a authorized gambit that Musk’s workforce hopes might flip the tide, his legal professionals on Tuesday accused Twitter of making an attempt to disguise which workers are accountable for evaluating spam accounts on the location — and requested Delaware Choose Kathaleen McCormick earlier on to pressure Twitter to establish them for questioning, a supply near the case informed The Submit.
The supply mentioned 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 informed The Submit.
Miller mentioned the technique should be a longshot, however that interviewing the staff is Musk’s finest likelihood 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 could be interpreted by a court docket as fraud and permit Musk to stroll away from the deal scot-free, Miller mentioned.
“Elon should present that not solely is the faux account quantity false, but additionally they knew it was false,” Miller mentioned. “If he wins on the fraud cost… the merger contract would not apply.”
Miller mentioned McCormick is more likely to grant Musk’s request as a result of not doing so might improve the chances her choice — if she guidelines in opposition to Musk — would get overturned on attraction.
However J.B. Heaton, an funding researcher and ex-corporate legal professional, sees issues in a different way. He informed The Submit that Musk’s push to interview Twitter workers quantities to a “fishing expedition” — and that the mogul’s single-minded concentrate on bots has turned his case right into a “gradual movement trainwreck.”
“They’re doubling down on a foul technique,” Heaton mentioned. “He received in, he received chilly ft and he determined, ‘I’m going to attempt to use bots as my problem.’ 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 because 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 in opposition to him and concentrate on minimizing the injury, Heaton mentioned.
They’d accomplish this by specializing in a provision within the contract that caps any termination charge at $1 billion — a drop within the bucket in comparison with the $44 billion deal that Twitter needs the court docket to implement. In keeping with Heaton, Musk’s legal professionals ought to argue that Musk ought to pay the charge and that forcing him to purchase the corporate — a measure referred to as particular efficiency — would “flip contract legislation on its head,” Heaton argued.
Whereas that is perhaps a extra convincing argument within the eyes of Choose McCormick and Delaware’s supreme court docket, it will additionally require Musk’s legal professionals to confront the billionaire who indicators their checks and inform him that his important argument is a stinker.
“Litigation is a hotbed of extreme optimism,” Heaton mentioned, including that there could be a “superb argument” to surrender on making an attempt to beat Twitter outright and as an alternative concentrate on controlling the injury.
Miller, nevertheless, sees that argument as a nonstarter. He mentioned that Musk ought to concentrate on arguing the bots problem as a result of if Delaware guidelines in opposition to Musk, it’s nearly certain to order him to purchase the corporate by means of particular efficiency.
That risk makes Musk’s latest inventory gross sales “very rational,” Miller mentioned.
“Elon promoting inventory tells me he plans to adjust to the court docket order if he loses,” he mentioned.