Look, after the merger agreement was approved, I was willing to accept that my prediction was incorrect. Perhaps Elon Musk was sincere this time! Perhaps he truly did want to be the owner of a failed social network! Perhaps Musk was truly anticipating getting ulcers from dealing with content moderation difficulties! We can all agree that Elon Musk is very interested in power because stranger things have been done in exchange for it. Why else would he be assessing the effectiveness of American law enforcement?
Twitter isn’t having Musk’s attempts to back out of the takeover of the company. Twitter took legal action in the rudest way imaginable: with the company that invented the poison pill. After that, the company sued Musk in an effort to compel the merger.
I enjoy a good court case. Can Twitter succeed? Tom Redburn, the head of securities litigation at Lowenstein Sandler, finishes laughing at my frustration and says, “He signed a contract, it says what it says. Musk’s ability to back out of the agreement is limited since he waived due diligence, which is the requirement that you examine the firm you’re buying before you agree to an acquisition. Redburn asserts, “That’s a difficult situation for a buyer to be in.”
In fact, according to Redburn, Delaware’s Chancery Court, which is frequently used by businesses, has a reputation for being quite indifferent to buyer’s remorse. In one well-known instance, a buyer was able to successfully back out of a deal due to fraud. Due to Akorn’s concealment of numerous financial issues, medical organisation Fresenius, best known for its US dialysis service, was able to avoid purchasing the drugmaker in 2018. Fresenius was able to demonstrate that Akorn falsified its statistics, according to Redburn. That would put a damper on a merger somewhat.
This is somewhat different from a shaky claim that Twitter’s method of accounting for fake activity is incorrect. The company won’t give him the information he needs to figure out how many spambots there are, which is Musk’s blatantly ill-intentioned justification for terminating the agreement with Twitter. Pathetic. Even if that were the case and I have no reason to think it is team Musk’s would still need to show that it had a meaningful impact on the company.
Redburn claims that if the theatrics are removed, the complaint is not unusual in any way. “Over the past five years, we’ve seen quite a bit of this.” For instance, private equity firm Kohlberg & Company attempted to wriggle out of a $550 million deal to acquire DecoPac, a company that makes cake decorations, during the pandemic. The DecoPac business was acquired by Kohlberg in May 2021 when the presiding judge, Kathaleen McCormick, rendered a decision against Kohlberg. McCormick, who Delaware refers to as the fanciest judge in chancery court, is currently the chancellor.
I’m not sure if the Twitter case will go to trial at this point. It appears like Twitter would be willing to reach a settlement, maybe by asking Musk for more money than the $1 billion provided in the contract in the event that the deal fell through. I suppose Twitter could renegotiate the deal at a lesser price, but if I were on the board of directors, I most definitely would not do that since you would then still be bound by your agreement with Elon Musk, and such shit is for fools. Even yet, I suppose there is now empirical proof that the entire board is made up of losers.
However, the case Twitter filed is the mechanism for those results; in order to receive any sort of compensation, it must still be committed to the condition of being bought by Musk. Discovery will therefore be the exciting next phase. Musk’s entire position can be destroyed with just one email or text in which he acknowledges he isn’t serious about the deal. And it occurs to me that someone might have provoked Musk into saying so given his poor self-control.
How likely is Musk to succeed? Well-known short sellers Hindenburg Research have gone long on Twitter, effectively shorting Musk. You may recall them as the ones who claimed fraud at electric car startups Nikola and Lordstown Motors, leading to SEC investigations. Additionally, an actual lawyer, Matt Levine of Bloomberg, has thoroughly examined the details of the lawsuit, so I won’t be able to do a better job. However, the debate I have been having with individuals over the past few weeks has piqued my attention. What I’m curious to know is what utter foolishness caused Twitter’s board to take Musk seriously in the first place.
Every time I have posed this question, I have received some sort of fiduciary obligation nonsense in response. Basically, the argument goes that in order to maximise shareholder value, Musk’s plainly jokey offer must be treated seriously since, gee whiz, if it were real, shareholders would get a lot of money.
But that’s precisely what I mean! Elon Musk is infamous for promising to do a lot of things, but only completing maybe a quarter of them, and frequently not in a timely manner. Your standard commonsense fiduciary duty is to tell the person wooing you for a buyout to go away if they have a history of poor impulse control, breaking contracts and launch licences, disobeying regulators (remember “I do not respect the SEC”? ), and bluffing that they’ll take their company private. Watch to see if he follows through on the tender offer he threatened to make or if he loses interest when something else bright and sparkly enters the picture. I mean, how many women did this man conceive of the 10 known children? This doesn’t exactly imply a capacity for dedication or, to be completely honest, much of an attention span.
Man, the more I think about the stupid little lectures about fiduciary obligation, the angrier I become. Anyone who has followed Musk is aware of his attempt to launch a media firm without considering how to monetize it, only to shut it down right away because, I suppose, it bored him? I’m talking about the short-lived Thud, which was somewhat similar to MSCHF but lacked a business plan. Musk came up with it as a result of not purchasing The Onion when it was available for sale; Thud folded before it had the opportunity to accomplish anything noteworthy.
