Wednesday, September 27, 2023

Twitter hits back at Elon Musk for breach of obligations

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Twitter fired back at Elon Musk on Monday, accusing him of “knowingly” violating an agreement to buy the social media company, just days after the Tesla Inc CEO tried to get out of the $44 billion deal.

Twitter stated in a letter to Musk on Sunday and filed with regulators on Monday that it had not breached its obligations under the merger agreement, as Musk pointed out Friday in its decision to end the deal.

“Twitter has not and is unlikely to experience a material adverse effect from the business,” it added.

The company planned to sue Musk to force him to complete the transaction, a threat Musk rejected on Monday. According to acquaintances of the situation, Twitter plans to file a lawsuit in Delaware early this week.

Twitter also said in the letter that the merger agreement is still in effect and would take steps to complete the transaction.

On Monday, Twitter shares closed 11.3 percent at $32.65 a share, a 40% discount on Musk’s bid of $54.20 and the largest daily percentage drop in more than 14 months. In the extended trade, they gained about 1%.

“Twitter’s board must consider the potential harm to its employees and shareholders as a result of any additional internal data exposed during lawsuits,” said Benchmark analyst Mark Zgutowicz.

According to Francis Pileggi, a corporate litigation attorney with Lewis Brisbois in Delaware, if Musk defends himself against Twitter’s lawsuit by claiming the company misrepresented the number of fake accounts, it would put bots at the heart of the lawsuit, AFP reports.

“I’d be surprised if he can’t get that information,” Pileggi said.

Pileggi believes that if the number of fake accounts exceeds Twitter’s estimate of 5%, it could lead to price negotiations for the social media platform.

According to legal experts, the 16-year-old social media company has a strong lawsuit against Musk, but could opt for renegotiation or settlement over a lengthy lawsuit.

“We believe Elon Musk’s intention to end the merger is based more on the recent market sell-off than on Twitter’s ‘failure’ to comply with its requests,” Jefferies analyst Brent Thill wrote in a note.

“We wouldn’t be surprised if the stock bottomed out at $23.5 in the absence of a deal.”

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