Elon Musk vs Twitter: Legally, who will possible emerge the winner?

In the Elon Musk vs Twitter saga, it’s the microblogging portal that has a robust authorized case in opposition to the Tesla CEO.

In the Elon Musk vs Twitter saga, it’s the microblogging portal that has a robust authorized case in opposition to the Tesla CEO who has walked away from his $44 billion deal to accumulate the US social media firm however may go for a renegotiation or settlement as a substitute of a protracted court docket struggle, based on authorized consultants.

Delaware courts, the place the dispute between the 2 sides is ready to be litigated, have set a excessive bar for acquirers being allowed to desert their offers. But goal corporations typically select the understanding of a renegotiated deal at a cheaper price or monetary compensation reasonably than a messy court docket battle that may final for a lot of months, three company legislation professors interviewed by Reuters stated.

“The argument for settling at something lower is that litigation is expensive,” stated Adam Badawi, a legislation professor at UC Berkeley. “And this thing is so messy that it might not be worth it.”

Twitter and Musk spokespeople didn’t instantly reply to requests for remark.

Musk’s most important declare in opposition to Twitter is that the San Francisco-based firm breached their deal as a result of it is not going to share with him sufficient info to again up its declare that spam or faux accounts represent lower than 5% of its lively customers. Twitter has stood by this estimate but in addition stated it is doable the variety of these accounts is larger.

Musk additionally stated in a letter to Twitter on Friday that the corporate’s misrepresentation of the variety of spam accounts is perhaps a “material adverse effect (MAE)” that will permit him to stroll away underneath the phrases of the deal contract.

But authorized consultants stated Delaware courts view MAEs as dramatic, sudden occasions that trigger long-term hurt to an organization’s efficiency. Deal contracts such because the one between Musk and Twitter are so prescriptive {that a} choose has dominated that an MAE has been validly triggered solely as soon as within the historical past of such litigation — within the case of German healthcare group Fresenius Kabi AG ending its deal for US generic drugmaker’s Acorn Inc in 2018.

In that case, a court docket dominated that Akorn’s assurances to Fresenius that it was in compliance with its regulatory obligations had been inaccurate. It additionally discovered that Akorn had withheld info about its deteriorating efficiency that emerged in whistleblower efficiency.

Legal consultants had been dismissive of the concept that inaccurate spam account numbers would quantity to an MAE for Twitter on the identical degree as the issues that plagued Akorn.

“If it goes to court, Musk has the burden to prove more likely than not, that the spam account numbers not only were false, but they were so false that it will have significant effect on Twitter’s earnings going forward,” stated Ann Lipton, affiliate dean for college analysis at Tulane Law School.

Musk additionally claimed that Twitter breached their settlement by firing two key high-ranking staff, its income product lead and normal supervisor of shopper, with out his consent as required by their contract.

“That’s probably the only claim that has any purchase,” stated Brian Quinn, a professor at Boston College Law School, however he added he didn’t consider the firings had been severe sufficient to have an effect on Twitter’s enterprise.

In 2020, the Delaware court docket allowed Mirae Asset Capital Co of South Korea to stroll away from a $5.8 billion luxurious lodge deal as a result of the pandemic brought about the vendor, Anbang Insurance Group of China, to change its peculiar course lodge operations.


Most of the occasions the courts discover in favor of the goal corporations and order acquirers to finish their offers – a authorized treatment often known as “specific performance.”

In 2001, for instance, Tyson Foods, the most important US rooster processor, determined it now not wished to purchase the most important meatpacker, IBP Inc. A choose ordered that the deal be accomplished.

Many corporations, nevertheless, select to settle with their acquirers to finish uncertainty about their future that may weigh on their staff, prospects and suppliers.

This occurred extra regularly when the COVID-19 pandemic broke out in 2020 and delivered a world financial shock. In one occasion, French retailer LVMH threatened to stroll away from a cope with Tiffany & Co. The US jewellery retailer agreed to decrease the acquisition worth by $425 million to $15.8 billion.

Simon Property Group Inc, the most important US mall operator, managed to chop its buy worth of a controlling stake in rival Taubman Centers Inc by 18% to $2.65 billion.

Other corporations let the acquirers stroll away in trade for monetary compensation. That contains medical know-how agency Channel Medsystems Inc, which sued Boston Scientific Corp for making an attempt to stroll away from their $275 million deal. In 2019, a choose dominated the deal needs to be accomplished and Boston Scientific paid Channel Medsystems an undisclosed settlement.

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