August 8, 2022

Courted after which jilted by the world’s richest particular person, Twitter appears to be like effectively positioned to win a courtroom battle with Elon Musk over a $1 billion breakup payment and extra — however the firm is not going to emerge unscathed.

Your entire saga has left observers baffled by what Wedbush analyst Dan Ives described as “one of many craziest enterprise tales ever.”

“I feel it begins off as a circus present and it is ending as a circus present,” Ives advised AFP.

Musk, the founder of electrical automobile firm Tesla, despatched a letter to Twitter on Friday saying he was pulling out of the controversial deal he made in April to purchase the platform for $54.20 per share, or $44 billion in whole.

However such merger agreements are “designed to stop consumers from getting chilly toes and deciding they need to stroll away,” explains Ann Lipton, a professor of legislation at Tulane College who makes a speciality of company litigation.

Musk, who additionally heads SpaceX, has accused the social media big of “false and deceptive representations” concerning the variety of faux accounts on its platform.

His attorneys additionally level to current Twitter worker layoffs and hiring freezes, which they are saying are opposite to the corporate’s obligation to proceed working usually.

These arguments could also be legitimate, however they don’t advantage pulling out of the deal, says Lipton, dismissing them as “nitpicky.”

“It is not sufficient, except he can present that the representations (about faux accounts) aren’t simply false, but additionally that they dramatically name the basics of the deal into query,” she explains.

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“Appears very very like Musk is legally unsuitable.”

 

 

That leaves the likelihood that the multi-billionaire is definitely attempting to renegotiate the value down.

This tactic has been used efficiently elsewhere, resembling by LVMH: two years in the past, the worldwide luxurious big broke off a deal to accumulate Tiffany earlier than getting a reduction.

However consultants do not see how Musk and Twitter might agree on a special value at this level, provided that the platform’s inventory has misplaced greater than 1 / 4 of its worth since late April.

“Each have quite a bit to lose,” Lipton factors out.

Elon Musk, seen right here in Texas in April 2022, appears to be like to be within the weaker place from a authorized standpoint as he tries to drag out of shopping for Twitter — however can nonetheless wreak havoc on the social community as he goes Photograph: AFP / JIM WATSON

 

If Twitter wins in courtroom, the mercurial entrepreneur will, at a minimal, need to pay a number of billion {dollars} in damages.

At worst, he might be compelled to honor his dedication and purchase Twitter at a value that has change into exorbitant, whereas his fortune has melted down by tens of billions of {dollars} in current months.

However although this might be a victory for shareholders, it might nonetheless go away Twitter in Musk’s fingers — and his libertarian imaginative and prescient of absolute free speech isn’t aligned with that of most of the staff, customers and advertisers on whom the platform’s enterprise mannequin relies upon.

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“Twitter is worse off than six months in the past, however in the long term, it is higher off with out him,” says Artistic Methods analyst Carolina Milanesi.

“It appears like a toy {that a} spoiled child desires, however does not actually know what to do with, so he would get tired of it, and never give it the eye it deserves, and neglect it in a nook … Twitter would die off slowly and painfully,” she predicts.

 

 

Any courtroom proceedings are anticipated to final for months, particularly since Musk “will drag it out,” in keeping with Lipton.

“Twitter is in a powerful place,” she says.

However Musk, adopted by greater than 100 million individuals on the platform, “will attempt to embarrass them — it will likely be distracting and demoralizing for workers,” she argues.

He has already harassed the platform with extremely crucial tweets, mockery and outlandish recommendations, inspired by his many followers.

For Twitter, “it is going be a battle on all fronts — retaining staff, rivals going after their enterprise, model points, traders believing the numbers,” says Ives, the Wedbush analyst.

In contrast to its Silicon Valley neighbors, Twitter has by no means been a money-making machine, capable of flip customers’ consideration into astronomical promoting revenues.

“The previous few months have been an enormous distraction for Twitter, retaining it from specializing in its enterprise fundamentals,” notes Debra Williamson of eMarketer.

“If Musk is ready to terminate the deal, Twitter will nonetheless be left with the identical issues it had earlier than he got here on the scene,” she says.

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“Its person progress is slowing. And whereas advert income remains to be rising marginally, Twitter is now coping with a slowing financial system that would squeeze advert spending on all social platforms.”