August 17, 2022

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Twitter-Musk trial set for October in lawsuit over $44 billion stalled acquisition

Twitter-Musk trial set for October in lawsuit over $44 billion stalled acquisition

Judge Kathleen St. Jude McCormick, chief justice of the Delaware Chancellor’s Court, ordered a five-day trial in October, over Mr. Musk’s objections. Counsellor McCormick said the issue must be resolved quickly, and she agreed Twitter claims it can be harmed due to uncertainty about its future as a public company.

“These concerns are fully demonstrated in the current case,” McCormick said. “Usually, the longer a merger deal remains in limbo, the greater the cloud of uncertainty for the company and the higher the risk of irreparable harm to sellers.”

Twitter argued The case must be expedited Because shareholders and its business I’ve been left in limbo By Mr. Musk’s move this month to escape the bargainciting the spread Fake or spam accounts on the platform. Twitter is seeking a remedy known as a “performance specific”, which means that Mr Musk will have to pursue the deal, rather than just monetary compensation.

At the hearing, Twitter’s lawyers said the lawsuit does not unlock the amount of spam and fake accounts because the merger agreement made no promises on this metric. Attorney William Savit noted that Twitter’s stock filings say the number of fake accounts and spam may be higher than the company’s estimates.

“This case that Musk says would require such a complex discovery is an invented case,” Mr. Savitt said. This is not the subject of the merger agreement. So it wouldn’t be what it was about.”

Twitter said Mr Musk feels buyer’s remorse for Fall in stock prices Since he made the deal in April, noting that Mr. Musk’s Personal Wealth It’s down more than $100 billion from its November 2021 peak. Twitter shares have fallen more than 25% since the deal was announced on April 25.

Mr. Musk said he needs more time to investigate The issue of spam and fake accounts, which he says is central to Twitter’s value and willingness to experiment will be “very real and expertly intensive, and takes a long time to discover”. The share of fake accounts is important in determining Twitter’s key performance metric — active, monetized daily users, according to Andrew Rosman, one of Mr. Musk’s lawyers.

Twitter estimates that less than 5% of daily active users can be monetized These are spam or fake messages Doubtful, perhaps too low, says Mr. Musk’s side.

“If you read their earnings calls, if you look at their analyst day text, it’s all about that metric,” Rossman said at the hearing.

Rossman said Twitter is trying to convince Mr. Musk to complete the deal while burying the truth about the number of fake accounts and spam. He said that Mr. Musk has a greater economic interest in the company, as the second largest shareholder, than the company’s entire board of directors, and therefore has no interest in stalling to damage the company.

Counsel McCormick did not address whether the case required verification of Twitter’s disclosures about spam accounts. She said she ruled at an earlier trial at least in part because Twitter wants to close the deal, and “it is not at all clear that the damages can constitute adequate compensation if Twitter eventually proves its case.”

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Twitter, which filed a lawsuit last week, says the process it has made Estimating fake accounts and malicious bots strict.

“There is no reason to delve into how many bots there are if a fair contract reading suggests that Musk essentially waived that right,” said James Cox, a professor of corporate and securities law at Duke University.

Elon Musk has established close ties with Beijing to build Tesla’s business in China. The Wall Street Journal is looking at how China uses Twitter to promote its views, and why that raises concerns. Image caption: Sharon Shee

Mr. Musk mentioned at least two different reasons related to fake and spam accounts for leaving the deal. One is that Twitter misrepresented the facts about that data in a way it could have been material negative effect in its works. Delaware law allows companies to cancel mergers If a significant negative effect occursbut its courts have imposed strict limits on the terms of such an outcome.

Mr. Musk says his other basis for exit is that Twitter withheld information about fake accounts, behavior that would violate his obligations under the merger agreement. “The limited information provided by Twitter warrants serious suspicion,” said Mr Musk’s lawyers Written last week in the court file.

A lawsuit filed over Mr. Musk’s compensation package in

Tesla a company

He is due to be tried in late October before the same judge.

write to Dave Michaels at [email protected]

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