The dreaded legal war between Twitter and Elon Musk is off to a flying start. The businessman sparked hostilities on July 9 by announcing that he refused to complete his takeover of the social network for 44 billion dollars, for which he had committed 3 months earlier. Twitter immediately responded by stating that it would go to court to force Elon Musk to honor his commitment.
From now on, the two camps go blow for blow, with at the center of the debates the date of the trial, which could greatly influence the economic health of Twitter and the balance of power between the two protagonists. The social network insists that the trial be held in September, while the Musk camp is trying to postpone the deadline to February 2023. The Delaware Court of Chancery, in charge of the case, could decide this week.
A trial in September to save Twitter?
In an official document filed on July 18, Twitter again insisted with the Delaware court that the trial be held in mid-September, a wish already made 4 days earlier that it qualifies “imperative”. As the Wall Street Journal reports, the company explains in its request that each additional day of public dispute causes it economic and reputational damage. In this sense, she accuses Elon Musk of refusing a quick trial to cause harm to the business of the company, and gain bargaining power. She also recalls that the billionaire uses his Twitter account to publicly denigrate the company, such as when he replied with a “poo emoji” to messages from CEO Parag Agrawal or when he questioned the economic viability of his model. The company even goes so far as to denounce a “tactical delay“intended to weaken him.
“No public company of this size and scale has ever had to endure this kind of level of uncertainty”, insists Twitter with justice.
To justify its request for an accelerated procedure, Twitter highlights the risks linked to the degraded economic climate for tech as well as the difficulties linked to the virtual freeze of its projects caused by the takeover procedure. Its stock is down 23% from Musk’s first April stake, but it’s only lost 9.93% for the year, an admittedly impressive drop but relatively small in the current environment. By way of comparison, Meta (Facebook, Instagram, etc.) lost 50% of its value over the year. Still, with each new argument with Elon Musk, the course plunges again.
Last argument advanced by Twitter, and not the least: the Court of Chancery of Delaware has previously judged similar cases within 60 to 75 days, the deadline it requests.
Intractable debate over the number of “bots”
Elon Musk’s lawyers have asked for the trial to be set for February 13, 2023, more than 4 months after the date desired by Twitter. The reason ? They would like to take more time to refine their estimate of the number of “bots” [comptes sans humain derrière, ndlr], at the center of the billionaire’s retraction. Twitter has regularly estimated since 2019 in its declarations to the SEC (the market regulator) to have less than 5% of fake accounts on its platform. Elon Musk says for his part that this number would rise to almost 20%. He argues that the social network overestimates its number of monetizable users, and therefore the value of the company. According to his reasoning, he would be harmed in relation to the buyback price, which would justify his withdrawal from the operation.
Also according to the Musk camp, the estimate of this number would be “extremely demanding in terms of indicators and expertise”which would require “a substantial time” and therefore a trial in more than 6 months. However, the billionaire has had time to present his own figures. At the beginning of June, the company agreed to give him access to its database which includes all the tweets in real time, so that he can carry out his own tests.
The problem is that even this access does not allow the Musk camp to replicate Twitter’s calculation. Indeed, the official estimate is based on metadata linked to tweets, which fall into the category of personal data and Twitter cannot therefore share them… This legal impasse allows the billionaire to play the watch in search of a satisfactory method of calculation which would allow him to verify his estimate made with a wet finger. In the meantime, he can maintain that the social network is lying – a serious accusation, punishable by imprisonment if proven – without the latter being able to prove the contrary.
In reaction to this request for a 6 month trial delay, Twitter called the bots’ argument “contractually irrelevant attraction“, and the many M&A experts interviewed by The gallery are going in this direction. The contract certainly includes a MAC clause (opposing material change), classic in this kind of operation. If it allows each of the two parties to cancel the contract, it can only be activated in the event of a drastically major economic change between the agreement and the definitive signature of the contract. In other words, even if the Musk camp managed to prove its position on bots in numbers, the harm caused might not be enough to trigger the clause. Hence his interest in dragging out the case: the more Twitter’s economic situation deteriorates, the more Elon Musk’s bargaining power for an amicable break-up increases.