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I agree with your analysis. This has always seemed a situation driven by ego rather than rational thought and I expect ego will prevail and we will see futile

I agree with your analysis. This has always seemed a situation driven by ego rather than rational thought and I expect ego will prevail and we will see futile legal + PR trench warfare for a while. However, my understanding of M&A law[1] is it's not enough for him to say that the numbers are missing or even wrong. He has to say that there was a material breach caused by the fact that the numbers were missing or wrong. So if you say "I went into this deal thinking twitter had no bots and OMFGBBQ there are bots" then twitter are going to say "look at our numerous filings on bots and why not actually go on twitter at all you can see there are bots" and therefore no material breach. He has to show somehow that the failure to provide him with complete and accurate information somehow makes the deal materially worse than he could reasonably have thought going in. And that's pretty hard to prove. I believe Delaware has been very reluctant to find material breach in these sorts of circumstances. (eg even if he was to somehow prove that the bot problem was 100x worse than twitter's public statements I'm not sure that would be sufficient to prove an actual material breach given the difference in ad revenue between "lots of bots" and "hella bots all over the place" is probably not material and he knew the revenue number going in). My expectation is he wants to make it painful enough for them in court and on social media to drop the breakup fee but they have seen for ages that he was likely to attempt this and would be sued to hell and back by other shareholders if they drop the fee and therefore will strap themselves in for a fight. [1] I'm definitely not a lawyer but I have been involved in a few M&A situations and have been advised on this kind of thing by pretty good lawyers a couple of times.

afterburner 4y ago
The podcast Opening Arguments had two great episodes about the legal details of this deal (note the first episode doubting this deal would go through was from 2 months ago): July 4th: https://openargs.com/oa610-elons-twitter-deal-was-a-complete-blunder-its-not-happening/ https://openargs.com/oa610-elons-twitter-deal-was-a-complete... May 12: https://openargs.com/oa595-shareholders-sue-twitter-alleged-facts-jeopardize-musk-deal/ https://openargs.com/oa595-shareholders-sue-twitter-alleged-...
- KVFinn 4y ago
  Thanks for these. Everyone else seems to be theory-crafting what will and could happen, but this is a practical, more grounded take.
- bdefore 4y ago
  Thanks for these. I listened to the July 4th one. For others who may be interested, the first 20 mins are unrelated and you may want to skip ahead to the 45 minute mark or so for their conclusions. Here is the brunt of why they think the deal won't go through: because it is difficult to prove extent of damages and because innocent third parties (the banks partnering with Musk) would be adversely affected, the courts will be disinclined to trigger the historically rare 'specific performance' to compel the merger. They believe a more likely outcome is Musk will instead be compelled to pay the $1 billion but a decade-long legal battle will ensue over it. While it is an interesting listen, I wish they provided more substance for their conclusions especially since they're running counter to most other debate I'm seeing. Third parties aside, I fail to understand how legally the courts cannot pursue Musk's personal assets for the full amount. But I'm not a lawyer and haven't read the purchase agreement in detail.
  - afterburner 4y ago
    I don't think the issue is that the courts don't have the power, it's that it would take forever to come to a conclusion in the court given the resources each side can pour into the fight, how complicated the legal details are, and how poor the legal system is at deciding these kinds of massive corporate legal issues (according to one of the podcast hosts). Since it would take forever, it's much more likely the two sides settle or give up before they run out of legal tricks.
prox 4y ago
So basically it’s like buying a house and finding faults with it that the seller had hidden?
- Lazare 4y ago
  Very much like that...except you're also in a legal system where the courts have ruled that the only "faults" that actually are major enough to count are things like "seller said it was 3br house; it's a one room shack" or "seller neglected to mention it had burnt to the ground last year and hasn't been rebuilt". Something like "Twitter lied, actually 15% of active users are bots, not < 5%" would never count. But "Twitter lied, 85% of active users are bots, the advertisers found out, they stopped buying ads, and now Twitter has been faking revenue numbers to cover it up" would count. It's hard to stress enough just how far Musk is from showing a Material Adverse Event, even if his wildest suspicions about the number of bots on Twitter are true (...not that it seems likely they are, mind you).
  - prox 4y ago
    And so it’s likely he owns Twitter at the end of this. Gonna be a field day at the courts then!
    - hef19898 4y ago
      Depending on the development of the stock market former Twitter shareholders might end up owning Tesla and / or SpaceX, at least partially. A field day in deed. Edit: Typos.
    - nolok 4y ago
      Actually no, it's more likely he'll look for the cheapest way to chicken out of this, as long as Twitter allows him to
    - mkd1964 4y ago
      Don't rule out another possibility. The true magnitude of the bot problem is exposed in court. Twitter is exposed for not only lying to Musk, they're also now in trouble for lying to the SEC (for years) and by that same token, lying to investors and advertisers. Twitter stock crashes to an unthinkable low, DWAC buys it all up.
lifeisstillgood 4y ago
OK I know this is a massive tangent but I have to ... OMFGBBQ ? Oh My F&&&&ing God Bar-B-Q ?
- myko 4y ago
  A modification of a decades old meme popularized on the defunct SomethingAwful.com forums https://www.urbandictionary.com/define.php?term=omgwtfbbq%21 https://www.urbandictionary.com/define.php?term=omgwtfbbq%21
  - coldpie 4y ago
    Very much not defunct. I've been posting there for more than 16 years :)

afterburner 4y ago

The podcast Opening Arguments had two great episodes about the legal details of this deal (note the first episode doubting this deal would go through was from 2 months ago): July 4th: https://openargs.com/oa610-elons-twitter-deal-was-a-complete-blunder-its-not-happening/ https://openargs.com/oa610-elons-twitter-deal-was-a-complete... May 12: https://openargs.com/oa595-shareholders-sue-twitter-alleged-facts-jeopardize-musk-deal/ https://openargs.com/oa595-shareholders-sue-twitter-alleged-...

KVFinn 4y ago
Thanks for these. Everyone else seems to be theory-crafting what will and could happen, but this is a practical, more grounded take.
bdefore 4y ago
Thanks for these. I listened to the July 4th one. For others who may be interested, the first 20 mins are unrelated and you may want to skip ahead to the 45 minute mark or so for their conclusions. Here is the brunt of why they think the deal won't go through: because it is difficult to prove extent of damages and because innocent third parties (the banks partnering with Musk) would be adversely affected, the courts will be disinclined to trigger the historically rare 'specific performance' to compel the merger. They believe a more likely outcome is Musk will instead be compelled to pay the $1 billion but a decade-long legal battle will ensue over it. While it is an interesting listen, I wish they provided more substance for their conclusions especially since they're running counter to most other debate I'm seeing. Third parties aside, I fail to understand how legally the courts cannot pursue Musk's personal assets for the full amount. But I'm not a lawyer and haven't read the purchase agreement in detail.
- afterburner 4y ago
  I don't think the issue is that the courts don't have the power, it's that it would take forever to come to a conclusion in the court given the resources each side can pour into the fight, how complicated the legal details are, and how poor the legal system is at deciding these kinds of massive corporate legal issues (according to one of the podcast hosts). Since it would take forever, it's much more likely the two sides settle or give up before they run out of legal tricks.

prox 4y ago

So basically it’s like buying a house and finding faults with it that the seller had hidden?

Lazare 4y ago
Very much like that...except you're also in a legal system where the courts have ruled that the only "faults" that actually are major enough to count are things like "seller said it was 3br house; it's a one room shack" or "seller neglected to mention it had burnt to the ground last year and hasn't been rebuilt". Something like "Twitter lied, actually 15% of active users are bots, not < 5%" would never count. But "Twitter lied, 85% of active users are bots, the advertisers found out, they stopped buying ads, and now Twitter has been faking revenue numbers to cover it up" would count. It's hard to stress enough just how far Musk is from showing a Material Adverse Event, even if his wildest suspicions about the number of bots on Twitter are true (...not that it seems likely they are, mind you).
- prox 4y ago
  And so it’s likely he owns Twitter at the end of this. Gonna be a field day at the courts then!
  - hef19898 4y ago
    Depending on the development of the stock market former Twitter shareholders might end up owning Tesla and / or SpaceX, at least partially. A field day in deed. Edit: Typos.
  - nolok 4y ago
    Actually no, it's more likely he'll look for the cheapest way to chicken out of this, as long as Twitter allows him to
  - mkd1964 4y ago
    Don't rule out another possibility. The true magnitude of the bot problem is exposed in court. Twitter is exposed for not only lying to Musk, they're also now in trouble for lying to the SEC (for years) and by that same token, lying to investors and advertisers. Twitter stock crashes to an unthinkable low, DWAC buys it all up.

lifeisstillgood 4y ago

OK I know this is a massive tangent but I have to ... OMFGBBQ ? Oh My F&&&&ing God Bar-B-Q ?

myko 4y ago
A modification of a decades old meme popularized on the defunct SomethingAwful.com forums https://www.urbandictionary.com/define.php?term=omgwtfbbq%21 https://www.urbandictionary.com/define.php?term=omgwtfbbq%21
- coldpie 4y ago
  Very much not defunct. I've been posting there for more than 16 years :)