A fierce legal battle is foretold as Tesla CEO Elon Musk announces that he will terminate a $44 billion deal to take over Twitter. Twitter said it would take legal action in protest against Musk’s unilateral breach of contract. When the lawsuit starts, the penalty is expected to reach 1 trillion won, an unprecedented litigation battle. Corporate legal experts predict that Twitter will have an advantage in court, as Musk will have to prove a “grave cause” for breaking the contract.
According to Bloomberg News, Musk notified Twitter on the 8th (local time) that he would revoke the agreement to acquire Twitter for $44 billion. This is two months after the acquisition contract was signed on April 26. Musk alleges that Twitter is in grave violation of the terms of the deal. It emphasized that Twitter did not comply with its obligation to provide fake and spam account status, which is important information to its business performance, and did not seek consent for changes in its business conduct, including layoffs.
Twitter reacted immediately. Twitter Chairman Brett Taylor said he plans to take legal action to enforce the deal.
In fact, once the lawsuit begins, it seems like it will be a long battle. This is because, according to the acquisition contract signed in April, if either party violates the contract, they will have to pay a penalty of 1 billion dollars. It is difficult to significantly lower the acquisition price to the current share price level. If Twitter offers to cut the price per share to convince Musk, it could lead to lawsuits from shareholders. Experts believe that Twitter will have an advantage when it comes to actual courtroom. Ann Lipton, professor of corporate governance at the University of Tulane School of Law, said Musk would find it difficult to prove that Twitter made false statements that had long-lasting implications for potential earnings.