Tesla’s chief executive said on Twitter on Friday that he was ending the deal, citing concerns about the number of spam accounts on the social networking platform. Twitter president Bret Taylor responded with a tweet stating that the company intended to “pursue legal action to enforce the merger agreement.” Twitter’s board is committed to closing the transaction based on the price and terms agreed with Mr. Musk and plans to take legal action to enforce the merger agreement. We are confident that we will prevail in the Delaware Court of First Instance. — Bret Taylor (@btaylor) July 8, 2022 A legal expert said he expects Twitter to file a lawsuit in Delaware, the US state that has jurisdiction over the deal, as soon as Monday. “They will probably seek a declaratory judgment that they are not in breach of contract. They will also seek a court order for Musk to specifically fulfill his obligations under the agreement,” said Brian Quinn, an associate professor at Boston College Law School. Under the terms of the deal, the company can ask a judge for “specific performance,” which would force Musk to buy the company for the $54.20 per share he agreed to in April. Alternatively, the company can also seek a $1 billion fee from Musk to withdraw from the deal in breach of the agreement. Quinn said Musk’s arguments would likely fail in court. In Friday’s letter, Musk made three broad arguments: that Twitter violated the agreement by failing to provide sufficient information about spam accounts; that Twitter has misrepresented the number of spam accounts in its disclosures to the US financial regulator; and that the company breached the agreement by failing to consult Musk when firing senior employees recently. Quinn said Musk’s requests for information about spam accounts were not “reasonable” and would not be accepted in court. “He cannot use unreasonable requests for information to create a pretext to allege a violation,” he said. John Coffee, a law professor at Columbia University, said: “Musk has very weak legal ground. Twitter seems to have given him access to almost everything to satisfy his desire to know the percentage of bots among its users.” Carl Tobias, Williams chair at the University of Richmond, said: “Musk’s filing does not appear to provide him with strong legal grounds to withdraw from the deal. His counsel has only made allegations and arguments for Musk’s position, and the judges will have to decide whether the evidence Musk would present is persuasive enough to support terminating the deal.” Subscribe to the Business Today daily email or follow Guardian Business on Twitter @BusinessDesk However, Tobias added that both sides could agree to settle instead of ending up in a situation where Musk is required to buy a company he no longer wants. Analysts have warned that a protracted legal battle could further damage Twitter’s share price and employee morale. A settlement with Musk would draw a line under the case. “Most disputes like this usually result in settlements that allow plaintiffs and defendants to save face,” Tobias said. Analysts also speculate that Musk could use the legal battle to seek a lower price for Twitter, though investors are also expected to consider legal action if the deal doesn’t go through at $54.20 a share and sue the difference between the selling price and the current share price. Twitter is currently trading at $36.81 per share. “I doubt the court will rule before there’s a settlement, and the daily price of Twitter will give you some idea of what the Musk side will be hoping to pay,” Coffee said.
