Twitter wins first legal battle with Elon Musk as trial continues in October

Twitter has won the first legal skirmish in its bid to force Elon Musk to complete a $44bn (£36.7bn) takeover of the social media company, after a judge ruled that a trial would take place in October.

Legal experts said the Delaware ruling was good news for Twitter, which had requested an expedited process to resolve the dispute. A Delaware judge said there was a “cloud of uncertainty” on Twitter and accepted the company’s argument that a delay would cause serious damage to the company.

“Delay threatens irreparable harm,” said Chancellor Kathaleen McCormick, chief justice of the Delaware court of chancery. “The longer the delay, the greater the risk.” McCormick added that the court was able to “deal with complex litigation quickly.”

Twitter is ultimately seeking a legal verdict that will force Musk to move forward with an agreed-upon transaction that values ​​the company at $54.20 per share. Musk pulled out of the deal this month, citing concerns about the number of spam accounts on the social media platform.

A lawyer representing Twitter at the virtual hearing accused Musk of “attempted sabotage.”

“He’s doing his best to bring down Twitter,” attorney William Savitt said.

On July 8, Musk said he was terminating the agreement for three main reasons: Twitter violated the agreement by not providing enough information about spam accounts; that he misrepresented the number of spam accounts in his disclosures to the US financial watchdog; and that he violated the agreement by failing to consult with him when laying off senior employees recently.

Musk’s attorney, Andrew Rossman, said the accusation that Musk was trying to harm the company was “absurd”.

“He has no stake in the company,” Rossman said, noting that the Tesla chief is Twitter’s second-largest shareholder with a far larger stake — at more than 9% — than the entire board. administration.

Savitt stressed the importance of an accelerated trial for Twitter to make important business decisions affecting everything from employee retention to vendor and customer relationships. He also pointed out that the debt financing backing the deal expires on April 25 next year, accelerating the need for a speedy legal resolution.

Rossman said more time was needed because it was “one of the largest private transactions in history” involving a “company that has a massive amount of data to analyze.” Billions of shares on their platform need to be analyzed. The faster legal process now gives Musk less time to assemble an analysis supporting his argument that Twitter underestimated the number of spam accounts.

McCormick asked the parties to schedule the October trial, which she said would last five days.

Legal watchers said the decision was a boost for Twitter, which is demanding that Musk be held to a legal deal reached in April to buy the company.

“It’s a good sign for Twitter,” said Robert Frenchman, partner at New York law firm Mukasey Frenchman.

“The last thing Twitter wants is an endless fight over counting and combating spambots, issues that are only tangentially relevant to whether Twitter has breached its obligations under the agreement. ‘purchase of shares’.

Commenting on the decision, Brian Quinn, a professor at Boston College Law School, said the decision was a victory for Twitter, which was seeking a trial in September in Delaware, the US state that is its social base.

It’s a victory for Twitter. The court granted the shipment, not exactly on Twitter’s very aggressive timeline, but very close. October for trial is not that far away and lawyers will have a lot to do to prepare for trial.

Twitter’s case for making the deal is summed up in its 62-page lawsuit against Musk, in which it argues the world’s richest man has no evidence that his spam accounts are more than 5% of its base of daily active users, with whom it has cooperated. His inquiries related to spamming issues and the fact that firing employees was part of the normal course of running the business.

Carl Tobias, Williams Professor of Law at the University of Richmond, said the two sides may decide to settle “because the matter will consume a lot of time and energy, and will distract Twitter and Musk from running smoothly. of their essential activities”.

He added that a lawsuit could tarnish both sides.

“It can also generalize the reputation of the parties and lead to a decline in the value of companies’ shares.”

Shares on Twitter rose 2.8% in the early afternoon to $39.48 on Tuesday.

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