My son and I are both corporate lawyers and we have both read the merger agreement and the letter from Musk's attorneys. My son subscribes to Matt Levine's newsletter. Levine is a former Wachtell attorney, investment banker and now has a column at Bloomberg. My son emailed to me the latest column and it is a good legal analysis of the Twitter lawsuit against Musk.
https://www.bloomberg.com/opinion/articles/2022-07-09/elon-s-out?sref=1kJVNqnU#xj4y7vzkg
The fact that Musk is working in such bad faith here — that he seems so unconcerned with law and the contract he signed — cuts both ways. On the one hand, it will certainly annoy a Delaware chancellor; Delaware likes to think of itself as a stable place for corporate deals, with predictable law and binding contracts, and Musk’s antics undermine that. On the other hand it might intimidate a Delaware chancellor: What if the court orders Musk to close the deal and he says no? They’re not gonna put him in Chancery jail. [6] The guy is pretty contemptuous of legal authority; he thinks he is above the law and he might be right. A showdown between Musk and a judge might undermine Delaware corporate law more than letting him weasel out of the deal would.
But the other thing that has to happen, for Twitter to get specific performance, is that “the Debt Financing ... has been funded or will be funded at the Closing.” Musk agreed to buy Twitter with $33.5 billion of his own money and $13 billion of debt financing from his banks, [7] and if the banks don’t put up their $13 billion then he doesn’t have to put up his $33.5 billion: In that case, he can pay the $1 billion to walk away.
Now, the banks have signed commitment letters obligating them to put up the money, and those commitment letters do not give the banks a ton of outs.....
This is not a perfect out: In theory, Twitter could ask a court to order Musk (to specifically perform his covenant) not to blow up his financing. There is some history of Delaware courts doing that, and of not being fooled by merger buyers who try to blow up their own financing. The banks’ commitment letters do not give them an out for anything that Musk does or doesn’t do; if Twitter cooperates with the financing banks and a court finds that there’s no cause to terminate the merger agreement, then in theory the banks should have to fund, so specific performance should still be available. But it’s messy, and you can sort of see a path to “Musk says the deal is off, so his banks walk away, so his financing isn’t available, so he doesn’t have to close the deal and can get away with just paying $1 billion.”
I like Twitter’s odds — its odds of getting specific performance and making Musk close the deal — in court, but I don’t think anything is a certainty at this point. And obviously Musk will make this fight as unpleasant as possible; already the attorney general of Texas has opened an investigation of Twitter’s bot numbers in order to harass Twitter and capitalize on Musk’s popularity with Republican voters. I have suggested in the past that Twitter’s best weapon in this dispute would be banning Musk from Twitter, because he is such an addict, but in fact he recently stayed off Twitter voluntarily for nine days, which I assume he did just to prove to Twitter the company that he can survive without Twitter the product. It is all going to be pretty awful and stupid
Both my son and I believe that Musk breached the merger agreement and that the $1 billion fee is the floor that Twitter should get.
Having a former Wachtell lawyer agree with our analysis amuses me.
This litigation will be fun to watch
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