Twitter and Elon Musk Will Probably Agree to a Settlement

Elon Musk agreed to buy the social media service and now he wants to back out. Will the courts make him pay up?

Elon Musk will probably pay Twitter a lot of money. He’s on the hook after signing a deal to buy it, throwing a tantrum, and trying to back out last week. And after reading Twitter’s powerhouse lawsuit, many observers now believe the Delaware courts will force him to buy Twitter for $44 billion, his initial offer price.

But a closer look at the legal process, with input from Delaware lawyers, indicates Musk might have more in his favor than the narrative suggests. He may still lose, or agree to a massive settlement, but a ruling that forces him to buy Twitter remains unlikely.

“I don’t think he’s screwed at all,’ said Morgan Ricks, a law professor at Vanderbilt University. “If it were a slam dunk case and the remedies were very clear and easily enforceable, then everyone would be buying Twitter at $52. Right now, it’s trading at $36.”

What Happens Next in the Twitter-Elon Musk Saga

Given that Musk seems to have violated his contract, the crucial questions are now what the Delaware Court of Chancery will do about it, and how Twitter’s legal team will anticipate those actions. The court may order Musk to buy Twitter at the agreed-upon price — via a “specific performance” clause in the contract that forces it — but that’s an unusual step the court isn’t fond of taking.

“Specific performance, under Delaware law, is an extraordinary remedy,” said Robert Penza, a Delaware lawyer with decades of experience before the Chancery Court. “They would only do it if they’re convinced there’s not an adequate remedy at law, such as monetary damages.”

The court may be particularly hesitant to order Musk to close the deal because it understands he might not comply, a seemingly preposterous notion that somehow carries weight. Carolyn Berger, the court’s former vice-chancellor, said this outright on CNBC Wednesday. “The problem with specific performance,” she said, “especially with Elon Musk, is that it’s unclear whether the order of the court would be obeyed.”

The court could fine Musk for noncompliance daily, Berger said, but the fines would simply pile up on a ledger and might not result in any action. So, a desire for a quick resolution might push the court to rule in favor of Twitter, but only levy damages, which lawyers familiar with the case believe are capped at $1 billion.

The possibility of not getting $44 billion via a specific performance order will loom over Twitter’s case and likely push it to settle. The Delaware court’s Chancellor, Kathaleen McCormick, has forced mergers in the past, and has written that the court “has not hesitated to order specific performance.” But the risk of failing to get the specific performance order, and landing only $1 billion in damages, could make a settlement for more than $1 billion appealing for Twitter.

Source link

We will be happy to hear your thoughts

Leave a reply

Enable registration in settings - general
Shopping cart