Elon Musk in Trouble, Will He Have to Acquire Twitter?

In the last two months, Elon Musk, the CEO of Tesla and SpaceX, has been trying to extricate himself from his agreement to purchase Twitter. Since he decided to acquire the social network at the end of April this year, and then abandoned the idea in July due to the excessive number of fake user profiles, the richest man in the world has been attempting to escape the entire situation.

Twitter, in fact, sued Musk in July to enforce the acquisition, and Musk is currently preparing for the trial scheduled for October. As Robert Miller, a legal expert in mergers and acquisitions, points out to Business Insider, Musk will be forced to buy Twitter for $44 billion, which he initially agreed to pay. Miller, who has extensive experience in mergers and acquisitions in the Delaware court where Twitter sued Musk, says he is very likely to lose the case due to his 'weak' arguments against Twitter.

– I think Musk is losing, and if he loses, I am really sure he will be ordered to complete the deal – said Miller.

Is Prison Threatening Him?

Musk has primarily criticized Twitter for providing false information about the number of active users, specifically that they have a higher number of fake accounts than they claimed. He also alleged that Twitter violates data privacy laws and that it does not have intellectual property over its tools. Additionally, he stated that Twitter violated securities law in Texas, where Musk occasionally resides.

However, Miller emphasizes that Musk not only has to prove that these allegations are true, but he must also demonstrate that they have 'negative material effect', which in legal terms means an impact on the business and the company's value. Therefore, Miller gives Musk less than a 10 percent chance of winning the case and escaping the acquisition.

When an acquirer refuses to enter into a merger agreement and thereby breaches it, well-established Delaware law mandates that the merger must still be completed, Miller explained. He detailed the powers the court has to ensure that Musk complies with any ruling, which includes seizing his Tesla shares and even the possibility of imprisonment.

A Billion Dollar Penalty

In an attempt to terminate the purchase agreement for Twitter, The Verge reports that Musk's lawyers sent three letters to Twitter two weeks ago. As a reason for terminating the agreement, they cited Twitter's multi-million dollar severance package to whistleblower and former security chief Peiter Zatko, which breaches their merger agreement. A few days later, Twitter responded that their argument is 'invalid', and that Twitter has not breached its side of the agreement, so neither can Musk.

Musk can appeal the ruling and likely will, but despite efforts to cancel the acquisition, Miller points out that he will almost certainly be forced to buy Twitter and become the new owner of the network this year.

– My conclusion is that Elon is in trouble – said Miller, adding that Musk would have a better chance of 'going to Mars and trying to do it according to Martian laws' than according to Texas laws.

Bloomberg reports that the entire situation will cost him additional millions and millions of wealth, but they also add that if he is not forced to buy Twitter and pay $44 billion for it, he will have to pay a 'mere' billion dollar penalty for breaking the acquisition agreement. Additionally, there is a chance that Musk and Twitter will eventually reach some sort of mutual agreement.