WASHINGTON DC —
Elon Musk and Twitter will face off Tuesday in the first court hearing
over the Tesla chief’s move to abandon their $44 billion buyout deal, a case
with massive stakes for both sides.
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Twitter wants a
judge to force Musk to complete the purchase, which he is trying to scrap over
his allegations the social media platform misled him about its tally of fake
accounts.
Billions of
dollars are at stake, but so is the future of the platform that Musk has said
should allow any legal speech, an absolutist position that has sparked fears
the network could be used to incite violence.
The hearing in the
eastern state of
Delaware is set to include arguments over Twitter’s push for a
September trial date, which is aimed at limiting the uncertainty plaguing the
firm.
“Questions have
been raised about Twitter’s future, and they don’t want this to drag on for
very long,” said Carl Tobias, a
University of Richmond law professor.
Musk’s legal team
has filed papers arguing that date is far too soon for such a complex matter,
and instead proposed mid-February.
Twitter lawyers
noted the deal is supposed to close toward the end of October, just six months
after Musk launched an unsolicited bid that the company’s board first resisted
but then supported.
The world’s
richest person has backed away from the deal in recent months as tech stocks
have tumbled, and Twitter’s value has fallen well below the $54.20 per share he
offered.
Musk willingness to
fight
Rather than
Silicon Valley, where Twitter is based, the company has
lodged its lawsuit against Musk in Delaware.
The firm is
incorporated in the tiny state like scores of other companies, and the case
will happen in the Delaware Chancery Court that has deep experience in business
disputes.
“The Chancery
Court, which handles most of these matters, is very experienced in corporate law,
and more particularly, mergers and acquisitions. So this is the place to go,”
Tobias added.
Kathaleen
McCormick, the judge overseeing the case, comes with a no-nonsense reputation.
She also
reportedly has the distinction of previously ordering a reluctant buyer into
completing a corporate merger.
A forced closing
of the Twitter deal is a scenario that some analysts consider possible.
“(Wall) Street and
legal experts across the board view Twitter as having a ‘strong iron fist upper
hand,’ heading into the Delaware court battle after months of this fiasco and
nightmare,” analyst Dan Ives wrote last week.
He also noted less
likely options include Musk paying a $1 billion breakup fee and being able to
walk away, or winning outright on his fake-account argument.
After pausing the
deal in May, Musk’s lawyers announced in July he was “terminating” the
agreement because of skepticism over Twitter’s false or spam accounts tally and
allegations the firm was not forthcoming with details.
Tuesday’s hearing
will be just the first step in what could be a lengthy legal fight that could
end in a trial, but also a settlement.
“Musk has shown
his willingness to take things all the way to the end in Delaware court,” said
Adam Badawi, a
University of California at Berkeley law professor.
“I think settling is not
necessarily his instinct.”
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