Social Media – Twitter and Musk are likely to be compared

According to experts, Twitter has a good chance of successfully defending in court before Tesla boss Elon Musk withdraws from the acquisition of $ 44 billion. It is also possible that the short message service will decide to renegotiate or settle instead of waging a lengthy legal battle against Musk to force him to buy on the terms agreed in April.

According to experts, the courts in the US state of Delaware, where the dispute could have been held, set the bar high for withdrawing from the acquisitions. However, despised companies often prefer the security of a renegotiated contract at a lower price or monetary compensation to litigation that can drag on for months. “The fact that litigation is expensive speaks for a deal on a lower acquisition price,” said Adam Badawi, law professor at the University of Berkeley. In addition, negotiations can be chaotic. So there is no certainty that going to court actually pays off.

Musk told his lawyers to explain on Friday that he is no longer sticking to his intention to buy. The reason was that Twitter was breaking the contract. The company did not provide him with enough information to confirm that less than five percent of Twitter’s active users are spam or bogus accounts. Twitter stuck to these estimates, but it also believes the number is higher. Musk stated that incorrect Twitter information about the number of spam accounts could constitute a “significant adverse effect” (English: significant adverse effect, IEA). Thanks to this, it can withdraw from the transaction in accordance with the terms of the contract.

Unexpected event

However, experts say Delaware courts would consider IEA to be dramatic, unexpected events that harm the company in the long run. Agreements like the one between Musk and Twitter are designed in such a way that the buyer is only right once in such legal disputes. It was about the German healthcare group Fresenius Kabi, which in 2018 resigned from the purchase of the American company Akorn. At the time, the court found that Akorn’s assurances to Fresenius that Akorn had complied with its regulatory obligations were incorrect. Moreover, according to the judge, Akorn withheld the facts about the worsening of his situation.

Experts say inaccurate counting of Twitter spam accounts shouldn’t be as serious a crime as Akorn’s problems. “If the case goes to court, there is a high probability that Musk will have to prove that spam account numbers were not only wrong, but also so wrong that they would have a significant impact on Twitter’s future earnings,” said Ann Lipton. , vice president – Dean of Science at Tulane Law School.

Musk also said Twitter breached contracts by firing two older workers without his approval. “That’s probably the only point that will survive,” says Brian Quinn, professor at Boston College Law School. He doubts, however, that the layoffs were severe enough to affect Twitter’s business.

In most cases, the courts rule in favor of the companies that need to be bought. They then instruct buyers to close the deal. This was the case in 2001. At the time, the largest chicken processor in the US, Tyson Foods, was no longer willing to buy the largest meat packer, IBP. However, the judge ruled that the contract must continue.

However, many companies decide to settle with the buyer. In this way, they want to avoid an uncertain future for the company that could weigh on employees, customers and suppliers. This happened in 2020, when the American jeweler Tiffany was acquired by the French luxury group LVMH. LVMH initially wanted to get out again. Tiffany eventually took over – but the price was cut by $ 425 million to $ 15.8 billion. Elsewhere, Simon Property Group, the largest shopping center operator in the United States, slashed the purchase price of a stake in competing Taubman Centers by 18 percent to $ 2.65 billion.

Twitter share price plummets

However, some cases also end up without seizure – but then with the payment of compensation. For example, in the case of medical technology company Channel Medsystems, which sued Boston Scientific because it wanted to get out of a $ 275 million acquisition. A judge awarded Channel Medsystems an undisclosed amount in 2019.

As far as is known, there is also such an agreement between Musk and Twitter. Musk would have to pay a billion dollars to withdraw from the deal. Musk cites Twitter’s breach of contract to cancel the takeover – but observers have long suspected that Tesla’s boss no longer wants the agreed $ 54.20 per Twitter share amid the fall in technology stocks on stock exchanges to count. Following the cancellation of the deal on Friday night, the weaker newspapers for weeks fell almost eight percent to $ 34.05. (apa / reuters)

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