Delaware Chancery Court for an ‘Epic’ Legal Battle – Opinion

Elon Musk walked away Friday from the $44billion deal to acquire Twitter. However, it is still far from done. Twitter quickly fired back, saying it intends to hold Musk to the terms of the acquisition and “would sue Musk in a Delaware chancery court to force him to” complete the sale.

Musk’s decision to nix the deal was based on his claim that fake accounts and bots lowered the value of the company. On Friday, I told the story of what bots actually are and why they’re important. Meanwhile, my colleague Mike Miller reported on how Elon’s latest move might be “unbelievably crippling” to Twitter regardless of how this plays out.

Back to what’s next. The New York Times reported that

…the fate of the influential social media network will be determined by what may be an epic court battle, involving months of expensive litigation and high-stakes negotiations by elite lawyers on both sides.

This one is sure to be interesting. It is unclear whether Musk will be required by a court to conclude the agreement or if he will be allowed to leave, even with a multi-billion dollar penalty. Legal experts agree that Twitter holds the advantage, according to the Washington Post and New York Times. The Times warns that this is a cautionary tale.

…Mr. Musk is known for his impulsiveness, brinkmanship, and is supported by top lawyers and bankers. Rather than engaging in a protracted public brawl with the world’s richest man and his legions of die-hard followers, Twitter might come under pressure to find a swift and relatively peaceful resolution — one that could preserve the company’s independence but leave it in a tenuous financial position.

According to Fortune, the entire affair will come down to three words: “Material Adverse Effect.” In other words, Musk must prove that Twitter’s refusal, in his view, to supply adequate information about fake accounts constitutes an adverse effect that didn’t enter into his initial calculations in offering to buy the company. Per Fortune:

To escape the deal, Musk must prove the alleged omission amounts to an “unexpected, fundamental, permanent” negative development—akin to blowing a hole in the transaction that can’t be fixed, said Larry Hamermesh, a University of Pennsylvania law professor.

Twitter claims that 5 percent of users are real, although other reports indicate that this number could be closer to 20%.

It’s hard to know where this is going, as in many ways, this case is unprecedented. The Wall Street Journal wrote:

“What are they going to do if there is a judgment and he says, ‘Well, I’m still not going to buy it’?” said Zohar Goshen, professor of transactional law at Columbia Law School. “They don’t really have tools to force him to go through with it. You don’t put people in jail because they don’t buy something.”

It is certain that this saga will not end.

This could end in a bitter, unsettling battle if it does. Musk is a remarkable success story in nearly every area he works on. While many Twitter users rejoiced that he bought the company to make it more profitable, this does not seem to be the case. As the saying goes, “may you live in interesting times.”

Yes, we do. And this promise to be even more exciting in the future.

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