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The lawsuit filed yesterday in Delaware Chancery Court, beyond being a fun read, shows the company is going in “with an iron fist and a clear upper hand,” Wedbush Securities big tech analyst Daniel Ives tells Deadline. He’s been following the Twitter-Musk saga closely and anticipates a Game of Thrones-like battle but one that could well go Twitter’s way. The rising stock price reflects Wall Street starting to build in punitive damages or a settlement well north of the $1 billion breakup fee, or possibly the original sale. The latter, however, might test the court’s enforcement power.
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Short-seller Hindenburg Research said Wednesday it had taken a long position in Twitter. “We have accumulated a significant long position in shares of Twitter. Twitter’s complaint poses a credible threat to Musk’s empire,” the firm tweeted.
Musk officially walked away from the deal on Friday with a letter from his attorneys to the Twitter board. Twitter said it would sue and did. The social media platform also requested a four-day expedited trial in September in order to stick to the original October 24 expiration date set for the deal close.
A judge of the Delaware Chancery Court, specialized in business issues, would schedule a hearing on that and ultimately rule on the case. Musk’s camp hasn’t weighed in yet and will likely try to delay. The burden of proof here is on the billionaire Tesla founder as the party that terminated the agreement.
Musk inked a deal to buy Twitter in late April for $54.20 a share but the shares began to fall in a market downturn and he started criticizing the company publicly soon after, focusing in particular on the number of fake, or bot, accounts on the platform. His termination letter said Twitter had not been not forthcoming with data that could constitute a “material adverse effect” and that the company fired people in violation of the merger agreement. Twitter denies all, calling Musk a hypocrite and saying he continually canceled meetings.
“Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests. Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, Musk apparently believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away,” the suit said.
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