Judge sets October trial for Musk-Twitter takeover dispute(latimes.com)
latimes.com
Judge sets October trial for Musk-Twitter takeover dispute
https://www.latimes.com/business/story/2022-07-19/judge-sets-october-trial-for-musk-twitter-takeover-dispute
22 comments
> It couldn't just have been a ploy to cash in on TSLA stock before it fell from its unsustainable heights could it?
He's done things like this before when he wanted to take Tesla private... so maybe.
>Why wouldn't you do this before making an all-cash offer at a significant premium above what any analyst would have valued it at?
I don't know this answer either. I'm trying to decide whether Elon (or his investors) were pushy to get it closed and failed to get the deal done before the market nosedived, or, he and his team are deliberately misinterpreting the whole, requesting information for "reasonable business purpose related to the consummation of the transactions contemplated by this Agreement." That seems to be a clause intended for information need related to closing the deal, but might be getting interpreted as a due diligence clause (since no due diligence was done).
He's done things like this before when he wanted to take Tesla private... so maybe.
>Why wouldn't you do this before making an all-cash offer at a significant premium above what any analyst would have valued it at?
I don't know this answer either. I'm trying to decide whether Elon (or his investors) were pushy to get it closed and failed to get the deal done before the market nosedived, or, he and his team are deliberately misinterpreting the whole, requesting information for "reasonable business purpose related to the consummation of the transactions contemplated by this Agreement." That seems to be a clause intended for information need related to closing the deal, but might be getting interpreted as a due diligence clause (since no due diligence was done).
Does a chaos titan really need a reason to do something? It could be as simple as he was on an ego trip that couldn't be sustained. It seems truly unlikely this was all a scam perpetuated for Elon to make some money.
From Matt Levine's ongoing coverage:
> On Tuesday, there will be a hearing on Twitter’s motion to expedite the case and have a trial in September, which Musk is opposing. (He wants a trial in February 2023.) That hearing will not decide the case or anything, but it will set the tone in important ways.
> If the judge, Delaware Chancellor Kathaleen McCormick, agrees with Musk that this should be a fact-intensive trial in which dozens of experts will have to testify about how to count bots, then she will probably delay the trial until 2023. That will be very good for Musk: the delay, but also the focus on bot-counting.
> If she agrees with Twitter that this should be a straightforward trial about what the merger agreement says and whether Musk has to do it, then she will probably set the trial for September, and that will be very good for Twitter.
( https://www.bloomberg.com/opinion/articles/2022-07-18/elon-w... )
This is a big win for Twitter.
> On Tuesday, there will be a hearing on Twitter’s motion to expedite the case and have a trial in September, which Musk is opposing. (He wants a trial in February 2023.) That hearing will not decide the case or anything, but it will set the tone in important ways.
> If the judge, Delaware Chancellor Kathaleen McCormick, agrees with Musk that this should be a fact-intensive trial in which dozens of experts will have to testify about how to count bots, then she will probably delay the trial until 2023. That will be very good for Musk: the delay, but also the focus on bot-counting.
> If she agrees with Twitter that this should be a straightforward trial about what the merger agreement says and whether Musk has to do it, then she will probably set the trial for September, and that will be very good for Twitter.
( https://www.bloomberg.com/opinion/articles/2022-07-18/elon-w... )
This is a big win for Twitter.
If Twitter wants Musk to honour the deal, does it mean that they'd have to maintain whatever terms they can, e.g. not materially changing their operations (assuming Musk loses the "hiring and firing" part)?
If Twitter seeks to enforce the agreement, yes, they should continue to comply from their side.
All reports of the purchase-agreement contract I've seen imply it's very seller-friendly, leaving Twitter plenty of typical-operations latitude to hire/fire/etc in response to business needs. (Proving a breach by Twitter Inc in those matters would likely require them doing something very drastic and abnormal.)
All reports of the purchase-agreement contract I've seen imply it's very seller-friendly, leaving Twitter plenty of typical-operations latitude to hire/fire/etc in response to business needs. (Proving a breach by Twitter Inc in those matters would likely require them doing something very drastic and abnormal.)
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> something very drastic and abnormal
I have heard it described as "something that materially changes the long terms prospects of the company"
I have heard it described as "something that materially changes the long terms prospects of the company"
Yes, and that actually factored into both Twitter's argument for having the hearing in September, and in the judge's ruling to have the trial in October.
I love Elon Musk but I don’t fully get why he would want a slow trial?
Shouldn’t he want a quick resolution to put this behind and focus on more important work?
Shouldn’t he want a quick resolution to put this behind and focus on more important work?
Apparently, if Musk manages to delay any possible close past next April, his existing financing promises from other sources will expire. Those financiers could then choose not to promise the same financing, in the new environment, which would be one of the established "outs" for the original acquisition contract.
So enough delay is a roundabout way for Musk to get what he wants. Both Twitter & the courts understand this, though, so are unlikely to entertain delay-for-delay's-sake.
So enough delay is a roundabout way for Musk to get what he wants. Both Twitter & the courts understand this, though, so are unlikely to entertain delay-for-delay's-sake.
Because, one of the reasons they are terminating the agreement is by claiming that Twitter's alleged misrepresentations will cause a material adverse effect [1]. A later court date gives them more time to dig into the data to bubble up any misrepresentations. It's a bit circular - they terminated the agreement on a "maybe," and want more time to bubble up misrepresentations to the public so they can turn that "maybe" into a "definitely". Yes, this is in violation of the anti-disparagement clauses, which Twitter has been complaining about in their filings. Also, I'm in agreement with the others that are claiming that a later court date can possibly give time for the markets (and Tesla's stock) to recover.
[1] https://www.sec.gov/Archives/edgar/data/1418091/000110465922...
[1] https://www.sec.gov/Archives/edgar/data/1418091/000110465922...
> Because, one of the reasons they are terminating the agreement is by claiming that Twitter's alleged misrepresentations will cause a material adverse effect [1]. A later court date gives them more time to dig into the data to bubble up any misrepresentations.
Well, no, that can't be a reason. In the absence of a material adverse effect, there's no benefit from uncovering a misrepresentation.
Well, no, that can't be a reason. In the absence of a material adverse effect, there's no benefit from uncovering a misrepresentation.
It depends on how you read into Elon's and Twitter's filings.
Elon has 2 core complaints:
1.) Twitter did not give requested info in a timely manner, which in many people's opinion is on shaky ground because the requested information is not related to the consummation of the transaction.
2.) Twitter's firing and layoffs are a breach of the contract, which, depending on how charitably you read into Twitter's negotiated rights under their lawsuit filing, isn't accurate because they negotiated the right to perform these tasks.
And one follow-up complaint:
3.) Twitter is liable to suffer a material adverse effect from the misrepresentation of false accounts, and has either already suffered this, or might suffer from it once it's uncovered. [1]
#1 and #2 have already come and gone (and could be on shaky ground). There is no need to dive into data for those. The only thing left is the investigation into spam accounts, which is what they want more time for. Their filing seems to be very careful in saying that there is, or maybe is a Material Adverse Effect, and it is clear that this is what Elon wants to investigate (based on his lawyers' filings today). So yeah, they most likely want more time to uncover a concrete misrepresentation to show in court.
[1] "Twitter’s representation in the Merger Agreement regarding the accuracy of its SEC disclosures relating to false and spam accounts may have also caused, or is reasonably likely to result in, a Company Material Adverse Effect, which may form an additional basis for terminating the Merger Agreement." https://www.sec.gov/Archives/edgar/data/1418091/000110465922...
Elon has 2 core complaints:
1.) Twitter did not give requested info in a timely manner, which in many people's opinion is on shaky ground because the requested information is not related to the consummation of the transaction.
2.) Twitter's firing and layoffs are a breach of the contract, which, depending on how charitably you read into Twitter's negotiated rights under their lawsuit filing, isn't accurate because they negotiated the right to perform these tasks.
And one follow-up complaint:
3.) Twitter is liable to suffer a material adverse effect from the misrepresentation of false accounts, and has either already suffered this, or might suffer from it once it's uncovered. [1]
#1 and #2 have already come and gone (and could be on shaky ground). There is no need to dive into data for those. The only thing left is the investigation into spam accounts, which is what they want more time for. Their filing seems to be very careful in saying that there is, or maybe is a Material Adverse Effect, and it is clear that this is what Elon wants to investigate (based on his lawyers' filings today). So yeah, they most likely want more time to uncover a concrete misrepresentation to show in court.
[1] "Twitter’s representation in the Merger Agreement regarding the accuracy of its SEC disclosures relating to false and spam accounts may have also caused, or is reasonably likely to result in, a Company Material Adverse Effect, which may form an additional basis for terminating the Merger Agreement." https://www.sec.gov/Archives/edgar/data/1418091/000110465922...
> and has either already suffered this, or might suffer from it once it's uncovered
The problem for this legal argument is that Musk is seeking to uncover this in order to create a MAE. If this were a permissible way to torpedo a deal then it would create a very perverse incentive. The appropriate time to act on these concerns was prior to waiving due diligence.
The problem for this legal argument is that Musk is seeking to uncover this in order to create a MAE. If this were a permissible way to torpedo a deal then it would create a very perverse incentive. The appropriate time to act on these concerns was prior to waiving due diligence.
He wants to pull out. The cheapest resolution for him is that he fails to get funding, and then he pays the $1B penalty. Last I heard, the commitments he's gotten for funds only last for a year. So, if he drags this into mid-2023, he won't be able to close the deal due to external factors and that's when the $1B penalty kicks in.
He's drawing it out so the markets recover
Exactly this. His entire "beef" is only due to the fall in Tesla stock price.
"Time kills all deals". He's trying to drag things out for a more favorable settlement.
Why wouldn't you do this before making an all-cash offer at a significant premium above what any analyst would have valued it at? It couldn't just have been a ploy to cash in on TSLA stock before it fell from its unsustainable heights could it?