(San Francisco) Lawyers for Twitter and Elon Musk will face each other for the first time on Tuesday in a preliminary hearing in an unprecedented legal battle between the world’s richest man and the social network, determined to to be redeemed by his slayer.
The platform launched lawsuits a week ago against the boss of Tesla and SpaceX to force him to honor his commitment to acquire it for 44 billion dollars.
And although she is going through an image crisis after months of attacks and denigration from her ex-suitor, she is the favorite.
“Twitter’s stock has been in good shape” since the lawsuit was filed, noted analyst Dan Ives of Wedbush Securities. “It seems that many investors who have read it have concluded that this Game of Thrones showdown in the courts is going to end in a victory for Twitter. »
By “victory”, the expert means a decision of the judge which would force Elon Musk to buy the Californian group at the price agreed at the end of April (54.20 dollars per share) or to pay substantial damages.
The wealthy entrepreneur unilaterally broke the agreement on July 8, on the grounds that Twitter’s board of directors allegedly failed to provide him with reliable information on the number of fake accounts active on the network.
But the chances that he will get out of it by paying only the indemnities for breaking the agreement (one billion dollars) or that he will be declared in his right are considered to be very low.
Litigation depends on the Delaware Court of Chancery, a court in this small state in the eastern United States, specializing in business law. Its president Kathaleen McCormick – the first woman in this position – has taken up the matter.
“She is a very serious judge, who will not be intimidated by either party. […] In the past, she has not been tender with those who show bad faith, ”remarks Adam Badawi, professor of law at the University of Berkeley.
In its complaint, Twitter accused Elon Musk of having shown “hypocrisy” and “bad faith”.
Lawyers for the company believe he has changed his mind in the face of the recent drop in stock market valuations of technology companies.
“After putting on quite a show to make Twitter a target, and after proposing and then signing a merger deal, Musk seems to believe he’s free – unlike any party bound by a contract under the law of the Delaware – to change your mind, defame the company, disrupt its business, destroy its stock value and wash your hands of it,” they said.
Kathaleen McCormick is best known for having forced Kohlberg, a company that had also tried to break off an engagement, to buy the company in question, DecoPac.
The fate of the bluebird, a social network used worldwide by politicians, celebrities, activists and influencers, seems to have little in common with that of less prominent organizations.
But “it’s not different enough, I think, for Delaware to risk its reputation by deciding not to apply the terms of the agreement”, considers Adam Badawi.
” Free electron ”
Tuesday’s hearing is to address the date of a possible trial.
Twitter asked for an accelerated procedure, from September, so as not to prolong the period of uncertainty which partially paralyzes the company.
Elon Musk’s lawyers filed an appeal on Friday to prevent hostilities from opening before next year.
They assure that the experts will have to analyze “mountains of data” to prove, as the multi-billionaire claims, that the platform is full of automated accounts and spam, well beyond the proportion of 5% officially indicated.
The judge should also take into account the deadlines of the financial package negotiated with banks and investors, so as not to compromise the possibility of a takeover.
The businessman and the board can still choose to agree on a slightly lower price and thus avoid the lawsuit.
“But it would be rational reasoning”, underlines Adam Badawi, in reference to the unpredictable character of Elon Musk, who acts as a “free electron”.
In another case tried in Delaware, Musk “showed his willingness to go all the way,” adds the professor. “And he won. I don’t think his instinct is necessarily to come to an arrangement. »
The saga of Elon Musk’s abortive takeover of Twitter in five acts
A diligent seduction, an engagement announcement, then a brutal breakup: Elon Musk blew hot and cold for three months around a possible takeover of Twitter that was finally aborted and in court from Tuesday.
On April 4, Elon Musk revealed in a document filed with the SEC, the American stock market regulator, that he had acquired nearly 73.5 million shares of Twitter common stock, or 9.2% of the company’s stock market value. , which flies off to Wall Street.
The next day, the general manager of the social network, Parag Agrawal, announces that the boss of Tesla has joined the board of directors of Twitter, before indicating on April 10 that Elon Musk has renounced to sit on it.
And for good reason, the whimsical businessman formulates on April 14 an offer to buy back the entire company at a unit price of 54.20 dollars per share. He indicates that it is “his best offer and his final offer”. She then values Twitter at around 44 billion dollars.
Twitter initially resists, announcing on April 15 that it has adopted a so-called “poison pill” clause, according to which the Californian group is ready to sell off its shares for all other shareholders in order to prevent Musk from easily redeeming its shares.
But the board of directors of the group ends up yielding and announces on April 25 a final agreement of takeover by the businessman of South African origin.
On April 29, the SEC reveals that Musk sold 9.6 million Tesla shares for about $8.4 billion.
On May 5, the leader claims to have also secured $7.14 billion in funding, thanks to investors including Oracle co-founder Larry Ellison and Saudi prince and businessman Al-Walid bin Talal.
Musk sows doubt
Then the case becomes more and more murky. Elon Musk first assures on May 10 that he will allow Donald Trump, who had been banned from Twitter after adding fuel to the fire during his supporters’ assault on the Capitol on January 6, to reinstate the social network.
On May 13, he indicated that he was suspending the takeover because of his concern about the real number of fake accounts on the social network, causing the group’s share price to plunge by around 20%. The same day, however, he said he was “still committed” to buying the network.
On May 16, to Parag Agrawal who tried to explain on Twitter the measures taken to fight against fake accounts, he replied with an emoji in the shape of a poop.
He threatens again on June 6 to withdraw his offer, because the social network “actively resists” his requests for information on spam and fake accounts, which the platform denies.
On June 16, he had a mixed exchange with Twitter employees, ensuring that he was aiming for one billion users and insisting on his ambition to reduce moderation on the site, worrying employees.
Finally, on July 8, the boss of Tesla and SpaceX informs Twitter that he is terminating the agreement because of “false and misleading statements” by the company on the fake accounts. Twitter’s board of directors announced legal action to enforce the terms of the agreement.
On July 12, arguing that Elon Musk’s strategy is “a model of hypocrisy” and “bad faith”, Twitter initiates proceedings before a court specializing in business law. A preliminary hearing is scheduled for Tuesday.