Twitter is expected to file a lawsuit in Delaware court in the coming days to force Tesla CEO Elon Musk to honor the $44 billion purchase agreement. As reported by New York Post, legal experts believe that Twitter may even win.
On Friday, Musk filed documents with regulators in which announced its intention to withdraw from the agreement. Shares of Twitter fell 7% in premarket trading on Monday.
Musk published Twitter meme in which he makes fun at the company for allegedly refusing to provide him with information about bots and spam accounts. He knows that Twitter will be forced to disclose the data in court.
His lawyers argued that “Twitter is in material breach of numerous provisions” of the buyout agreement, and that the company “appears to have made false and misleading statements on which Mr. Musk relied when entering into the merger agreement.”
Musk backed out of the deal after Twitter failed to provide information about fake accounts on the platform, according to court documents filed by his team.
Anne Lipton, professor of corporate governance at Tulane Law School, told CNBC that she doubts Twitter has done what Musk claims. According to Lipton, even if Musk had been misled by Twitter, it still wouldn’t be grounds for voiding the merger agreement.
Ms. Lipton believes that Musk would have to prove in court that Twitter made false claims that were egregious to the point that it would have a long-term negative impact on the social media company’s potential earnings.
“He has yet to put forth evidence that that is in fact the case,” Lipton said.
Legal analysts note that the merger agreement contained a “special performance clause” that gives Twitter the right to sue Musk to force him to honor the deal as long as funding is available.
“He (Musk) makes a number of legal arguments — I think all of questionable standing,” Adam Sterling, executive director of the Berkeley Business and Law Center, told CNBC.
It’s unclear whether Musk, who has committed to buy back Twitter shares for $54.20 apiece (420 is a slang term for marijuana or its use), simply wants to renegotiate the deal to lower the price.
Sterling added: “Twitter appears to have a very strong legal argument but we’ve not seen a precedent at this scale or an opponent like Elon Musk so, there’s many questions about what he will do.”