After spending months Elon Musk is trying to escape the deal he signed to take over Twitter, but Elon Musk now says he plans to finalize the purchase. In a letter to Twitter filed with the SEC today, Musk said he would honor his deal to buy the company for the originally agreed price of $54.20 per share. Twitter said today that it intended to close the deal.
Although Musk has suggested in public statements since he first questioned the deal in May that he could easily waive his $44 billion pledge, legal experts weren’t surprised by the turnaround.
Robert Miller, chair of corporate finance and law at the University of Iowa College of Law, says Musk’s attempt to escape the agreement he signed was always “a tough climb,” citing how the entrepreneur had moved on from arguing. about the contract to accusing Twitter of fraud. For this argument to work, he says, the company must have committed “a massive Enron-type fraud,” for which no evidence has surfaced.
Musk announced in May that his takeover of Twitter “temporarily on hold‘, saying that the company had downplayed the number of spam and fake accounts on the platform. In an August legal filing, Musk accused Twitter of fraud, claiming there were more bots on the platform than the company had disclosed. In September, after whistleblower Peiter “Mudge” Zatko testified before the US Senate that Twitter’s cybersecurity is “a decade behind industry security standards,” Musk added those allegations to his own lawsuit.
But by accusing Twitter of fraud, Musk set a high legal bar for himself. Allegations of fraud are very difficult to prove, Miller says, showing that Twitter was not only aware of any issues, but also deliberately tried to mislead Musk about them.
The material that came to light ahead of the trial due next week in the Chancery Court in Delaware did not provide much support for that argument. “He knows his best claim is fraud, but they got the proof from Twitter and there’s nothing here that looks like fraud,” Miller said. “They have no more cards to play.”
Musk’s decision to fold may also have been influenced by the possibility of the process causing him personal harm. The entrepreneur watched in Silicon Valley last week as the internet chewed up a tranche of his personal text messages with key figures. This week, he was confronted with what Miller says would likely have been “a very embarrassing” statement.
With such slim chances of victory, by continuing in court, Musk could have done more damage to the company that it became increasingly likely he would eventually own. That could have jeopardized his relationship with fellow investors who would have relieved the entrepreneur some financial pressure by agreeing to finance his acquisition deal, said Ann Lipton, an associate professor of business law and entrepreneurship at Tulane University. “The more this went on, not only did Musk risk buying a company that was worse off than when he started this process, but he also did it with less stock support,” Lipton says.
