Friday, 19 August, 2022
E-paper

October trial set in Musk, Twitter buyout battle

Twitter notched an early win Tuesday in its fight with Elon Musk, after a judge agreed to a fast-track trial on whether to force the Tesla chief to complete his $44 billion buyout of the social network.

Musk's lawyers had pushed for a February 2023 date, but the court in the eastern US state of Delaware hewed closely to the uncertainty-wracked platform's desire for speed and set an October start.

Billions of dollars are at stake, but so is the future of Twitter, which Musk has said should allow any legal speech -- an absolutist position that has sparked fears the network could be used to incite violence.

Judge Kathaleen McCormick, who set a five-day trial and left the sides to work with the court to fix the exact date, noted that the "risk of irreparable harm" generally grows the longer a merger remains in limbo.

Musk's team argued fiercely against an relatively quick date, saying the core issues are simply too complex.

"Billions of actions on their platform have to be analyzed in order for us to get to the bottom of the real issue," said Musk lawyer Andrew Rossman.

"The real issue here is what's the percentage of real users on the Twitter platform versus spam or false accounts," he added.

After pausing the deal in May, Musk moved in early July to "terminate" his unsolicited buyout bid after he accused the platform of misleading him on the number of its so-called "bot" accounts, and not being forthcoming with details.

Twitter has argued his claims are simply an effort by him to back out of the deal, and its lawyer William Savitt said "the continued uncertainty caused by Musk's purported termination inflicts harm on Twitter every day, every hour of every day."

Experts watching the trial saw the relatively rapid timeline as a triumph for the social network, which is limping along while the buyout endgame remains unclear.

"I think it was pretty favorable for Twitter. She didn't give them exactly what they wanted, but she gave them a pretty speedy trial," said Adam Badawi, a University of California at Berkeley law professor.

The social network's lawyers had asked for a September date, just months after Musk launched a bid that the company's board initially resisted but then supported.

The world's richest person has backed away from the deal in recent months as tech stocks have tumbled, and Twitter's value has fallen well below the $54.20 per share he offered.

- Musk willingness to fight -

Rather than Silicon Valley, where Twitter is based, the company has lodged its lawsuit against Musk in Delaware.

The firm is incorporated in the tiny state like scores of other companies, and the case will be heard in the Delaware Chancery Court, which has deep experience in business disputes.

"The Chancery Court, which handles most of these matters, is very expert in corporate law, and more particularly, mergers and acquisitions. So this is the place to go," said Carl Tobias, a University of Richmond law professor.

McCormick, who ran the hearing remotely after she tested positive for Covid-19, comes with a no-nonsense reputation.

She also reportedly has the distinction of previously ordering a reluctant buyer into completing a corporate merger.

A forced closing of the Twitter deal is a scenario that some analysts consider possible.

"(Wall) Street and legal experts across the board view Twitter as having a 'strong iron fist upper hand,' heading into the Delaware court battle after months of this fiasco and nightmare," analyst Dan Ives wrote last week.

He also noted that less likely options include Musk paying a $1 billion break-up fee and being able to walk away, or winning outright on his fake account argument.

Tuesday's hearing was just the first step in what could be a lengthy legal fight that could end in a trial, but also a settlement.

"Musk has shown his willingness to take things all the way to the end in Delaware court," said Badawi, the Berkeley law professor.

"I think settling is not necessarily his instinct."