Elon Musk is abandoning his legal battle to get back from buying Twitter by letting go with his initial bid of $44 billion for the social media platform.
Tesla CEO Mercurial made the offer in a letter to Twitter, Musk said in a Tuesday filing with the US Securities and Exchange Commission.
The offer comes two weeks before Twitter’s lawsuit seeking to force Musk to go along with the agreement will go to trial in the Delaware Chancery Court.
According to the document he will complete the process as long as he receives the loan and the court will dismiss the lawsuit.
By pursuing the contract, Musk essentially gave Twitter what it was seeking from the court – “exclusive performance” of the contract with Musk, meaning it had to go out and buy it. at the original price. The contract Musk signed has a $1 billion breakeven fee.
Eric Talley, a law professor at Columbia University, said he was not surprised by Musk’s reversal, especially before the time set for Musk by Twitter lawyers that began Thursday “is not good .”
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“From a legal point of view, his case was not very strong,” Talley said. “It looks like a case of buyer’s remorse.”
If Musk loses the lawsuit, the judge could not only force him to close the deal but also impose a financial penalty that could cost more, Talley said.
What surprised Talley was that Musk didn’t seem to be trying to renegotiate the deal. Even if it’s a small price Musk can have a “moral victory” and be able to say he got something out of the long debate, Talley said.
News of the new offering led to a trading halt in Twitter stock Tuesday afternoon on the New York Stock Exchange on “pending news” after jumping nearly 13 percent to $47.93. . That’s still below the price of $54.20 at Musk’s initial offer. Stop trading is how stock transactions are made available to investors and there are times when trading is particularly volatile for a stock or when a company is about to release information that the market moves.
Neither Twitter nor lawyers for Musk responded to requests for comment Tuesday afternoon.
Musk has been trying to back out of the contract for several months after signing to buy the San Francisco company in April. Shareholders have approved the sale, and legal experts say Musk faces a major challenge in defending Twitter’s lawsuit, which was filed in July.
Musk said Twitter was undercounting the number of fake accounts on its platform, and Twitter protested when Musk said it had stopped working.
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Musk’s argument rested on the allegation that Twitter miscalculated how to measure the number of “spam bot” accounts that were not useful to marketers. Most legal experts believe that he had trouble impeaching Chancellor Kathaleen St. Jude McCormick, the presiding judge of the court, has changed something since the April merger agreement that should stop the work.
Legal experts said Musk may have thought he would lose. Things haven’t gone well for him in court recently, with judges often ruling in favor of Twitter over evidentiary issues, said Ann Lipton, an associate professor of law at the University. of Tulane. The judge denied several of Musk’s discovery requests, Lipton said.
Musk’s allies in the deal may also be starting to panic about the situation, he said.
Musk’s main argument for the shutdown — that Twitter misrepresented how it measured its “spam bot” problem — also doesn’t hold up as Twitter has worked to isolate Musk’s efforts to empower third-party data scientists. his concerns.
Twitter now has options in case it doesn’t have to accept a new offer from Musk, said Robert Anderson, a law professor at Pepperdine University.
“Twitter is always concerned that the same thing could happen again without additional security,” Anderson said. “They want assurance that the deal will actually happen.”
Columbia’s Talley said he would insist Musk put money into an escrow until the deal is done. That account could hold money and/or Twitter shares, as Musk’s real-life testimony, Talley said.
Interestingly, Musk and the CEO of Twitter Parag Agrawal have not written a statement about the contract on Twitter, many developments in the dispute have been released. Musk’s series of tweets in the past 24 hours related to the divisive demand for an end to Russia’s aggression against Ukraine, drawing the ire of Ukrainian President Volodymyr Zelenskyy.
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Musk argued in a tweet on Monday that in order to reach peace, Russia must agree to keep the Crimea Peninsula, which it seized in 2014. He also said that Ukraine must withdraw its independence, and submitted a bid to join NATO after Russia reorganized its reservists.
If the deal goes through, Musk could end up taking on a company that he has damaged with statements against fake accounts, wrote Susannah Streeter, a senior market analyst for Hargreaves Lansdown in the United Kingdom, in a financial statement. “This is an important metric that is considered to be key to future revenue streams through paid ads or subscriptions on the site, and his analysis of Twitter’s figures over the past few months which will prompt questions from media partners,” he wrote.
News of the settlement came just hours after Musk’s lawyers filed a motion late Monday night seeking sanctions against Twitter for allegedly calling Peiter “Mudge.” Zatko in June to destroy evidence. In a statement, Musk’s attorneys said that “there are serious allegations against the plaintiff, and all the evidence that has been destroyed supports Mr. Zatko’s claims.”
If Musk loses, among the remedies preferred by Twitter is a court order to enter the process. The Chancery Court last year forced private equity firm Kohlberg & Co. to buy $550 million of DecoPac, a Minnesota-based company that claims to be the world’s largest supplier of cake decorating supplies to decorators and retailers. The case is indicative of the court’s – albeit inconsistent – decision to enforce contractual obligations against consumers.
Other options include forcing Musk to pay a mutually agreed-upon severance fee if deemed responsible for the deal’s failure. Or he could be worth more without selling the company for $44 billion.
Marcy Gordon in Washington contributed to this report.