Twitter shakes Musk down with Delaware muscle

WASHINGTON (Reuters Breakingviews) – Now it’s Twitter’s turn to mess with Elon Musk. The Tesla boss on Friday ditched his $44 billion buyout of the social network after months of criticizing the firm. The social media company has now hired Wachtell, Lipton, Rosen & Katz to plan a lawsuit to enforce the merger agreement. The legal ammunition, which includes former Delaware Chief Justice Leo Strine, could be messy. But the messier it gets for both Musk and Twitter, the more likely it is they’ll settle on their own before the court decides.

The deal constructed quickly in April includes a mediocre $1 billion fee that would be paid by Musk if he walks away, assuming certain criteria are met. For weeks he has been griping about fake accounts on the platform, and on Friday he cited that as a reason for walking away. The company is fighting back. Twitter board chair Bret Taylor said directors are committed to closing the deal and will pursue legal action.

It could be ugly for both sides, at least in the near term. If Musk stays true to form, he’ll continue to work to undermine Twitter’s business model and perhaps even some of its board members. The social network’s market value went up as high as $40 billion under his halo, but it has fallen to about $26 billion, about $4 billion shy of where it was before Musk disclosed his 9% stake in April. The more he makes their lives miserable, the more likely they are to settle outside of court.

But Twitter can use a public battle to get him to pay more, which may be the goal. Musk, too, has several distractions. Tesla’s stock is off more than a third since early April, while the S&P 500 Index is down less than half as much. Insider recently reported that he had twins with a woman who is an executive at one of his companies. And a recent call with Twitter employees didn’t leave the impression that he was wholly interested in getting them on board with his idea of a takeover.  

The more painful the legal proceedings become, the more motivated he might be to get Twitter off his neck. Plus Musk’s financing may be getting shaky, and Twitter shareholders could use some certainty, like a massive fee for him to back out. Closing this chapter would help put the company in a spot where it can try to turn around on its own or better position it for another, more committed buyer.

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CONTEXT NEWS

Twitter has hired law firm Wachtell, Lipton, Rosen & Katz in its planned legal battle against Elon Musk, Reuters reported on July 10. The Tesla chief executive’s lawyer said on July 8 that he was terminating the merger agreement and accused Twitter of material breaches of the pact, including failing to provide requested information on fake accounts on the platform.

(Editing by Lauren Silva Laughlin and Amanda Gomez)

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