Twitter Wins Round One: Trial Over Musk Purchase Will Happen This Fall
Things move fast in the Delaware Chancery Court and if you blink, you just might miss it. A week and a half ago, you'll recall, Musk sought to terminate the deal using the exact pretextual excuses most of us assumed he would be using, and which he telegraphed in his letter to Twitter. Days later, Twitter sued Musk in the Delaware Chancery Court, which is somewhat well known for its relatively rapid docket pace. As part of the complaint, seeking to force Musk to complete the deal, Twitter sought an expedited trial schedule, asking for the trial to happen in September. The filing also laid out, in pretty plain English, just how much Musk's claims were absolute bullshit and have nothing to do with the crux of the agreement.
Musk's reply to the request for expedited trial was, as we noted, incredibly weak, though seemed design to excite his fans on Twitter (which it did, even as their legal analysis is lacking coherence). Most of the complaint focused on the spam issue, which is not even remotely at play here. No matter how much Musk and his vocal fans want you to believe it is, there is no condition that lets Musk escape the deal by claiming that there was more spam on the platform than Twitter publicly claimed. Not to mention that Musk is extremely misleading in his statements over what Twitter has claimed and what it does about spam.
Either way, Musk argued for a trial in February of next year, which he claimed was necessary in order to conduct complex" discovery, including deposing dozens of people, both witnesses and experts.
Earlier today, the Chancellor handling the case (who is recovering from Covid) held a virtual hearing to discuss the expedition argument. The hearing (unsurprisingly) followed pretty much along the lines of the pleadings. Twitter pointed out that the only issues necessary for expedition were (1) does Twitter have a colorable claim and (2) will delay lead to irreparable harm - and that both such claims carry a fairly low bar in Delaware. Also, Twitter's lawyers accurately noted that Musk, in his reply, responded to neither such point, but rather tossed out a lot of irrelevant nonsense about spam. An invented issue" to cover up for Musk's buyer's remorse" was how Twitter's lawyers described it.
Musk's lawyers, with little else to grab onto effectively banged the table. They tried to make a big deal over the fact that by filing the complaint Twitter extended the closing date, which is true, but meaningless. But the argument was that there was no rush to do the trial in September when they have financial commitments that will hold until April. Twitter responded that the clause extending the closing date was there to protect Twitter in case Musk tried to pull a stunt like this two days before closing, leaving them no time to seek an adequate remedy, and that it was the height of ridiculousness to flip that around and use it against Twitter.
Musk's lawyers also kept trying to lean into the spam argument, which Twitter made clear wasn't even an issue at play and was just fluff and nonsense.
The Chancellor allowed both parties to state their case, and only asked a few clarifying questions on the margins, before asking for a short recess. When she came back, she actually gave an extended, detailed, explanation of the issues at play, and the various factors weighting each side (many of which seemed to mirror Twitter's arguments).
In the end, she said that the trial will be held in October and the parties will figure out the exact date. While she notes it could still be moved, for the most part, that's the ruling. That's one month later than Twitter asked for, but it's much closer to Twitter's request than Musk's. And, while the Chancellor did not speak about the merits (which weren't at stake yet) just the fact that almost her entire discussion mirrored Twitter's pleadings, and basically didn't even mention any of Musk's extraneous and silly arguments, seems to bode well for Twitter.
On the whole, she agreed that an extended delay will do irreparable harm to Twitter and basically ignored Musk's argument that more time was needed to get all the data he needs.
From the filing, I noted that it seemed like Musk was in deep on this one, and I still stand by that. That doesn't mean he won't wriggle out of it. He has a history of doing that. But right now, he effectively dealt himself a terrible hand, and has no poker face, yet seems to think he can bluff his way out of it. It's not a good position to be in, especially with $44 billion on the line.
My money would still be on an eventual settlement with Musk paying somewhat more than the $1 billion termination fee in the purchase agreement to just walk away. There is a decent possibility that Twitter agrees to settle with Musk still buying the company at a slightly lower price - but again, Twitter seems to have the much stronger hand at this moment, so I can't see it going much lower. But, going to court is always a gamble, so there are no certainties as to how this all turns out.
But, I would not want to be in Musk's position in any lawsuit. His argument is weak and his own actions have made it weaker. And if he doesn't settle between now and October, this case should have lots of fireworks.