Delaware’s Chancery seems an apt place to hear the pleas of a billionaire no-one believes.
Elon Musk’s attempt to get out of his $44bn (€44.16bn) Twitter takeover contract seems risible.
He is overpaid. He knows it. We know it. Twitter knows it. And there seems little chance that a Delaware court is going to let him get out of it.
Remember why he said he wanted to buy it in the first place? It was to rid the platform of spam bots. Now he claims there are actually more spam bots than he thought. So many in fact, that it should nullify the sale.
I cannot emphasise this enough: no-one at all believes him.
It’s not just that he hasn’t produced a shred of evidence to back up his hasty allegations of spam bots exceeding Twitter’s 5pc estimates.
It’s that anyone with a working frontal lobe can see that he agreed to buy it just before tech stocks collapsed.
Now he’s out of pocket by $10bn. Even for the world’s richest man, that’s worth trying to wriggle out of.
But here’s why he won’t win.
His case relies on two main legal arguments. First, that a higher number of spam bots than disclosed might materially affect the value of the company he agreed to buy.
He has a near-impossible task in proving this. He cannot prove that there are more spam bots than Twitter’s 5pc estimate.
Even if he could, it would have to be a wildly higher number to “materially” affect the value of the company.
In other words, he would have to show that Twitter’s advertisers are leaving in droves because of the newly uncovered spam bots. So he won’t win there.
The second reason stands more of a chance, in theory at least.
If he can prove that Twitter didn’t satisfy reasonable requests for information, or keep him updated about important things going on at the company, he may be entitled to back out. Musk appears to be relying on a few unanswered, or partially answered, queries about data quality. He also says that the dismissal of two Twitter executives qualifies as something he should have been kept abreast of.
But again, Musk’s problem here is proportionality. Twitter has generally gone out of its way in giving Musk access to its data.
This culminated in an extraordinary look at its raw ‘firehose’ data as it hits Twitter’s servers. For Musk to argue that “reasonable” requests around data quality haven’t been satisfied will be a tall order.
Similarly, it’s hard to know what Musk may have been able to do about the company letting two executives go. He couldn’t have objected or influenced the process. So it’s a very difficult to see a court deciding that either of these claims are sufficient grounds to cancel such a major contract.
Lastly, Musk may finally be a victim of his own notoriety. Even if his case held some water, the Delaware court will be acutely aware that the world is watching this case and its handling of it.
In many ways, it is the reputation of the Delaware Chancery that is also on trial here.
Delaware, for those unfamiliar with the tiny state, is chiefly known as a place to go for the formation and regulation of companies – whether it’s Stripe’s Atlas or a start-up.
Is it going to be known as a place that caves to the antics of a billionaire bully? If anything, might not there be a subconscious bias the opposite way? That the court is above such noisy shenanigans and is a place of calm continuity?
Right now, all signs point to an outright Twitter win or a renegotiation of the purchase price. I would bet that the latter is the more likely option.
Musk has the means to draw this out for months, or even years. That could wreck the company. There are already reports of cratering morale and departures at the company.
Anyone I know at the Dublin operation – which employs 500 people – is dismayed at what’s going on. It doesn’t help that Musk has been slagging off the rationale behind huge chunks of the work the Dublin office is engaged in.
Shareholders, too, might decide that Musk’s mad dog online behaviour shows that he’ll string the case out like a soap opera – until he either gets his way, or the company is really hurt.
That could incentivise them to accept an amended – lower – offer for the company.
For users of the service, the prognosis is a lot less clear.
What started out as a party – ‘We finally get an edit button!’ – is now starting to look like a real trudge.
Then again, Twitter’s resilience might be a silver lining to the very thing that has kept its earning potential so far below other platforms. It remains, at its core, a very simple platform dominated by a single scroll of short posts.
It’s hard to completely mess that up.
And that might be the thing that now keeps it treading water while its corporate future is slugged out.
Denial of responsibility! planetcirculate is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.