Twitter's odds of getting specific performance and making Musk close the deal

[LetMyPeopleVote]

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.

Link to tweet

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

[brooklynite]

1. OPENING ARGUMENTS has a solid discussion of this issue

https://openargs.com/oa610-elons-twitter-deal-was-a-complete-blunder-its-not-happening/

[Cha]

2. TY for this, LMPV.. I'm not

good with legalese but I read the whole thing.. it certainly has been ""pretty awful and stupid" so far.

I want Musk gone from our Social Media where we get so Much information and can support Democracy that the M$M Deprives us of.

So now the "AG of Texas has "opened an investigation of Twitter" to fuck with Democracy.

[SergeStorms]

3. Why is the Attorney General of Texas....

investigating anything for a private citizen? The citizens of Texas are paying for Musk's private financial fuck-ups now?

I'm no attorney, and I'm sure that's abundantly clear to everyone, but this doesn't seem kosher to me.

[Ms. Toad]

4. There is a difference between specific performance, and a monetary award of damages.

Courts are loathe to order specific performance (an equitable remedy) when throwing money at the problem can compensate the non-breaching party.

Here, the loss can be calculated relatively easily (the difference between the value at the date the contract was entered into and the value at the time of the breach + costs of negotiating a deal to sell it to someone else at today's value). Twitter walks away with Twitter + cash to compensate it for musk's breach, and musk walks away with a slightly emptier pocket.

[LetMyPeopleVote]

11. The Merger Agreement provides for specific performance as a remedy

This is where the litigation will be interesting

https://www.sec.gov/Archives/edgar/data/1418091/000119312522120461/d310843dex21.htm

Section 9.9 Specific Performance.

(a) The parties hereto agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that the parties hereto do not perform the provisions of this Agreement (including failing to take such actions as are required of it hereunder to consummate this Agreement) in accordance with its specified terms or otherwise breach such provisions. Accordingly, the parties hereto acknowledge and agree that the parties hereto shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereto agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that any other party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity. Any party seeking an injunction or injunctions or any other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to show proof of actual damages or provide any bond or other security in connection with any such order or injunction.

(b) Notwithstanding anything herein to the contrary, including the availability of the Parent Termination Fee or other monetary damages, remedy or award, it is hereby acknowledged and agreed that the Company shall be entitled to specific performance or other equitable remedy to enforce Parent and Acquisition Sub’s obligations to cause the Equity Investor to fund the Equity Financing, or to enforce the Equity Investor’s obligation to fund the Equity Financing directly, and to consummate the Closing if and for so long as, (i) all of the conditions set forth in Section 7.1 and Section 7.2 (other than those conditions that are to be satisfied at the Closing; provided, that such conditions are capable of being satisfied if the Closing were to occur at such time) have been satisfied or waived and Parent has failed to consummate the Closing on the date required pursuant to the terms of Section 2.2, (ii) the Debt Financing (or, as applicable, the Alternative Financing) has been funded or will be funded at the Closing if the Equity Financing is funded at the Closing, and (iii) the Company has confirmed that, if specific performance or other equity remedy is granted and the Equity Financing and Debt Financing are funded, then the Closing will occur. For the avoidance of doubt, (A) while the Company may concurrently seek (x) specific performance or other equitable relief, subject to the terms of this Section 9.9, and (y) payment of the Parent Termination Fee or other monetary damages, remedy or award if, as and when required pursuant to this Agreement), under no circumstances shall the Company be permitted or entitled to receive both a grant of specific performance to cause the Equity Financing to be funded, on the one hand, and payment of the Parent Termination Fee or other monetary damages, remedy or award, on the other hand; provided, however, that in no event shall the Company be permitted or entitled to receive aggregate monetary damages in excess of the Parent Termination Fee (except in all cases that Parent shall also be obligated with respect to its expense reimbursement and indemnification obligations contained in Section 6.11 and its applicable obligations under Section 8.3(d)(iii) and Section 8.6(b)).

(c) To the extent any party hereto brings an action, suit or proceeding to specifically enforce the performance of the terms and provisions of this Agreement (other than an action to enforce specifically any provision that expressly survives the termination of this Agreement), the Termination Date shall automatically be extended to (i) the twentieth (20th) Business Day following the resolution of such action, suit or proceeding or (ii) such other time period established by the court presiding over such action, suit or proceeding.

[Ms. Toad]

13. I wrote junk like that in the multi-million dollar contracts I drafted, too.

It makes the suits happy, but it doesn't make the provisions enforceable. I tried to limit the provisions I drafted to those which are likely enforceable, but sometimes the non-legal people insisted, it doesn't hurt anything, and it shifts the bosses annoyance from me to the courts in the unlikely event they are needed.

Even liquidated damages provisions which provide for monetary (legal) remedies are not necessarily enforceable. Equitable remedies are court-fashioned remedies, and even less likely to be enforced by the court.

[LetMyPeopleVote]

15. Wilson Sonsini is a decent firm and so it will be interesting to see what happens

This will be fun to watch

Link to tweet

[Ms. Toad]

16. My guess is they will settle,

And the underlying legal issue we've be decided by the court.

Provisions like the ones in the contract, even though not generally enforceable, get used as leverage a lot since no one wants to take the risk as to what the judge will do.

[LetMyPeopleVote]

17. The Delaware Chancery Court has granted specific performance in other deals

The Delaware Chancery Court has ordered Tyson and Kohlberg & Co to close deals that had specific performance clauses

Link to tweet

[Ms. Toad]

20. You did see the note about it being uncommon, right? n/t

[LetMyPeopleVote]

22. I have been doing large public company deals for a very long time

In addition, I have originated and have help try a good number of large lawsuits and had fun doing things like converting a good securities fraud case into a simple contract claim that went up to the Texas supreme court where we prevailed. i have had the pleasure of having to argue a summary judgement against the late Steve Susman of Susman Godfrey where the judge sent us to mediation where we settled for a great settlement. Heck, I got to meet Joe Biden at a fundraiser at Steve's condo back in 2019 where I got a Biden hug and got to talk stuttering with Joe.

I understand the concepts involved here but I and others (including my son who is a corporate partner at one of the largest firms in Houston) have concluded that Twitter has a decent chance of going for specific performance in the Delaware Chancery Court.

You are entitled to your opinion, and I am entitled to discount such opinion

[Ms. Toad]

25. I don't see anything in your experience

which suggests success in seeking specific performance for breach of an acquisition contract.

Most of my involvement in this thread is to counter the lay assumption that just because the parties included a specific performance provision the courts will enforce it. They won't. It is a separate decision made by the court, balancing the elements which need to be met before an award of specific performance is appropriate.

As I've explained (for the benefit of non-attorneys), the preferred remedy (regardless of what the contract says) is to throw money at the breach. Even the tweet you linked to to prove your point acknowledged that the award of specific performance was uncommon.

Time will tell, but my money is on a settlement, or - if it gets that far - on a monetary award.

[LetMyPeopleVote]

29. Four cases lawyers for Twitter and Elon Musk will be examining as they head to court

I was pleased to see that Twitter filed today and the only claim is for specific performance. This article amuses me. Here are good summaries for four cases in which the Delaware chancery court ruled for specific performance

Link to tweet

https://www.cnbc.com/2022/07/12/here-are-four-past-cases-twitter-and-elon-musks-lawyers-will-be-examining-as-they-head-to-court.html?utm_source=dlvr.it&utm_medium=twitter

IBP v. Tyson Foods
In this 2001 case, Tyson agreed to acquire IBP, a meat distributor, for $30 per share, or $3.2 billion, after winning a bidding war. But when Tyson and IBP’s businesses both suffered following the agreement, Tyson tried to get out of the deal and argued there were hidden financial problems at IBP.

Judge Leo Strine found no evidence that IBP materially breached the contract and said Tyson simply had “buyer’s regret.” That didn’t justify calling off a deal, he said.

Strine ruled Tyson had to buy IBP given the contract’s specific performance clause.

“Specific performance is the decisively preferable remedy for Tyson’s breach, as it is the only method by which to adequately redress the harm threatened to IBP and its stockholders,” Strine wrote.

More than 20 years later, Tyson still owns IBP.

The Tyson deal differs in a few key ways, however. Tyson hoped a judge would allow it to walk away from the deal in part because of significant deterioration to IBP’s business after the agreement was signed. Musk is arguing false and vague information about spam accounts should allow him to walk.

Also, unlike Tyson’s deal for IBP, Musk’s acquisition of Twitter involves billions of dollars in external financing. It’s unclear how a decision in favor of Twitter would affect potential funding for a deal or whether that could impact closing.

Strine now works at Wachtell, Lipton, Rosen & Katz, the firm Twitter hired to argue its case.

[Ms. Toad]

38. Technically, the claim is breach of contract.

The remedy sought is specific performance (rather than monetary damages). The court is free to ignore the specific relief sought and impose the more standard legal remedy of monetary damages.

As noted, I predict a settlement (the conclusion in two of the 4 cases mentioned). Time will tell.

[LetMyPeopleVote]

30. Four cases lawyers for Twitter and Elon Musk will be examining as they head to court

Link to tweet

https://www.cnbc.com/2022/07/12/here-are-four-past-cases-twitter-and-elon-musks-lawyers-will-be-examining-as-they-head-to-court.html?utm_source=dlvr.it&utm_medium=twitter

AB Stable v. Maps Hotels and Resorts
In this 2020 case, a South Korean financial services company agreed to buy 15 U.S. hotels from AB Stable, a subsidiary of Anbang Insurance Group, a Chinese company, for $5.8 billion. The deal was signed in September 2019 and scheduled to close in April 2020.

The buyer argued Covid-19 shutdowns were cause for a material adverse effect on the deal. The seller sued for specific performance.

Judge J. Travis Laster found that hotel shutdowns and dramatic capacity reductions breached the “ordinary course” of business clause, and ruled that the buyer could get out of the deal.

The Delaware Supreme Court affirmed the decision in 2021.

[Ms. Toad]

35. Real property is a standard exception the rule which favors monetary damages. n/t

[LetMyPeopleVote]

31. Four cases lawyers for Twitter and Elon Musk will be examining as they head to court

Link to tweet

https://www.cnbc.com/2022/07/12/here-are-four-past-cases-twitter-and-elon-musks-lawyers-will-be-examining-as-they-head-to-court.html?utm_source=dlvr.it&utm_medium=twitter

Tiffany v. LVMH
In another Covid-related case, LVMH originally agreed to buy jewelry maker Tiffany for $16.2 billion in November 2019. LVMH then attempted to scrap the deal in September 2020 during the pandemic, before it was set to close in November. Tiffany sued for specific performance.

In this case, a judge never issued a ruling, because the two sides agreed to a lowered price to account for the drop in demand during the Covid-induced global economic pullback. LVMH agreed to pay $15.8 billion for Tiffany in October 2020. The deal closed in January 2021.

[Ms. Toad]

36. Precisely what I expect to happen here - a settlement. n/t

[LetMyPeopleVote]

32. Four cases lawyers for Twitter and Elon Musk will be examining as they head to court

Link to tweet

https://www.cnbc.com/2022/07/12/here-are-four-past-cases-twitter-and-elon-musks-lawyers-will-be-examining-as-they-head-to-court.html?utm_source=dlvr.it&utm_medium=twitter

Genesco v. Finish Line
Footwear retailer Finish Line initially agreed to buy Genesco for $1.5 billion in June 2007 with a closing date of Dec. 31, 2007. Finish Line attempted to terminate the deal in September of that year, claiming Genesco “committed securities fraud and fraudulently induced Finish Line to enter into the deal by not providing material information” concerning earnings projections.

As with the Tyson case, the Delaware Chancery Court ruled Genesco had met its obligations and that Finish Line simply had buyer’s remorse for paying too much. Markets had begun to crash in mid-2007 during the start of the housing and financial crisis.

But rather than going through with the deal, both sides agreed to terminate the transaction, with Finish Line paying Genesco damages. In March 2008, with the credit market cratering, Finish Line and its primary lender UBS agreed to pay Genesco $175 million, and Genesco received a 12% stake in Finish Line.

Genesco remains an independent publicly traded stock to date. JD Sports Fashion agreed to buy Finish Line for $558 million in 2018.

[Ms. Toad]

37. Another settlement. n/t

[LetMyPeopleVote]

39. A Chancellor has been assigned in the Twitter v. Musk case.

Link to tweet

[LetMyPeopleVote]

40. Musk is trying to re-write merger agreement with Twitter

Musk is trying to invent a way out of the merger with Twitter. The Merger Agreement is filed with the SEC and you read it here https://www.sec.gov/Archives/edgar/data/1418091/000119312522120461/d310843dex21.htm There is no representation by Twitter as to the number of bots in the Merger Agreement. Musk is trying to pretend that there is some sort of representation and warranty as to the number of bots on Twitter

Here is a good analysis of why Musk is wrong and why the attempt to rewrite the merger agreement is going to fail

Link to tweet

https://www.bloomberg.com/opinion/articles/2022-07-18/elon-wants-to-fight-the-bots?utm_medium=social&utm_campaign=socialflow-organic&cmpid%3D=socialflow-twitter-view&utm_content=view&utm_source=twitter#xj4y7vzkg

In our actual universe none of this is true. In the real world, Musk signed a merger agreement with Twitter, and it was publicly filed, and you can read it here. That merger agreement does not mention bots at all. In pursuing and signing this deal, Musk was excited about “defeating” the bots, sure, but he didn’t care how many there were. (The more of them there are, the more glory in defeating them.) He did not do any due diligence on the number of bots before signing the agreement, nor did he ask Twitter to make any promises about how many bots there were. Nothing in the negotiations over the deal, or in the merger agreement itself, was in any way contingent on anything at all about bots.

Now, even in the real world, the merger agreement does contain a representation that none of Twitter’s filings with the US Securities and Exchange Commission “contained any untrue statement of a material fact.” And if that representation is false enough to have a “material adverse effect” on Twitter, then Musk can get out of the deal.

And Twitter’s SEC filings do mention bots. But they don’t contain any promises that no more than 5% of Twitter’s users are bots. These filings are also public, and you can also read them. Here is what they say about bots:

There are a number of false or spam accounts in existence on our platform. We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the first quarter of 2022 represented fewer than 5% of our mDAU during the quarter. The false or spam accounts for a period represents the average of false or spam accounts in the samples during each monthly analysis period during the quarter. In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated.

Let’s pick out the factual assertions in that paragraph:

1. There are “false or spam accounts” on Twitter.

2. Twitter reviews some sample accounts each month.

3. It estimates, based on that review, that the bots (false or spam accounts) are fewer than 5% of mDAUs.

4. That estimate is based on the “average of false or spam accounts in the samples.”

5. That estimate, and the labeling of spam accounts, is subjective; Twitter “applied significant judgment” to reach it.

6. “The actual number of false or spam accounts could be higher than we have estimated.”

Musk wants to claim that he was promised that the botts would be less that 5% and he is not happy with the way that Twitter calculates the number of botts. However that is not what the merger agreement says and Musk cannot cancel the merger agreement unless he can prove a violation that will have a material adverse effect.

In today's hearing the judge sided mostly with Twitter which is not a good sign for Musk

On Tuesday, there will be a hearing on Twitter’s motion to expedite the case and have a trial in September, which Musk is opposing. (He wants a trial in February 2023.) That hearing will not decide the case or anything, but it will set the tone in important ways. If the judge, Delaware Chancellor Kathaleen McCormick, agrees with Musk that this should be a fact-intensive trial in which dozens of experts will have to testify about how to count bots, then she will probably delay the trial until 2023. That will be very good for Musk: the delay, but also the focus on bot-counting. If she agrees with Twitter that this should be a straightforward trial about what the merger agreement says and whether Musk has to do it, then she will probably set the trial for September, and that will be very good for Twitter.

The ruling for Twitter indicates that the judge is probably not doing to let this trial be solely about botts.

Link to tweet

Having a trial in October is not good news for Musk

[mathematic]

18. Difference between merger price 54.20 and today's price 32ish is substantial

Is this difference the damages you're talking about? Because that's not a slightly emptier pocket. And Musk would pay this with no money coming from the financing he got? That's 3/4s of what he was actually committing to the deal. Seems like he would just buy twitter if this is the alternative.

[Ms. Toad]

21. Yup. That's the differnece.

(And there will be other costs added in that Twitter incurred because of the breach.) And since the amount is easy to calculate, the judge can just make the breaching party throw money at the non-breaching party.

That's one of the reasons I think they will settle. Courts don't look favorably on intentional breach - so there's no reason to soft-pedal the damages. On the flip side - once it hits court, Musk may be in precisety the situation you suggest - out a lot of money and no company to show for it. If the court awards monetry damages and Musk decides he'd rather have Twitter, the deal is already tanked so Twitter is under no obligation to sell it to him.

[JI7]

5. Could they all agree to settle for like 3 billion dollars of his own money ?

If both sides agreed that he pay 3 billion or some other amount greater than 1 billion to walk away from the deal ?

Could they just settle that way ?

[niyad]

6. musk could save everyone a lot of aggravation if he stroked out.

[MichMan]

7. Why is everyone so certain that Twitter didn't mislead regarding the fake accounts?

[LetMyPeopleVote]

9. Because we read the merger agreement

Here is some good analysis by an ex-Wachtel lawyer/investment bannker

Link to tweet

https://www.bloomberg.com/opinion/articles/2022-07-09/elon-s-out?sref=1kJVNqnU#xj4y7vzkg

The first pretext is: Twitter has been lying about bots. For at least eight years, Twitter has said in its SEC filings that it estimates that fewer than 5% of its monetizable daily active users are “false or spam accounts,” and in the merger agreement it represents that its SEC filings are accurate. Ringler says that “it appears that Twitter is dramatically understating the proportion of spam and false accounts represented in its mDAU count.” There is not a whisper of evidence for this claim, no hint that there might be evidence, no acknowledgement that a reasonable reader of this letter might want to see evidence. The only basis for the claim is that “preliminary analysis by Mr. Musk’s advisors of the information provided by Twitter to date causes Mr. Musk to strongly believe that the proportion of false and spam accounts included in the reported mDAU count is wildly higher than 5%.” Notice that Ringler does not say that the analysis shows that the bots are “wildly higher than 5%” of mDAUs: That would be a factual claim that, I suspect, Musk’s advisers know is false. They make only the subjective claim that Musk “strongly believes” it. I don’t even believe that he believes it! But that’s harder to disprove......

Even so, though, Musk cannot get out of the deal just because one of Twitter’s representations is false. He still has to close the deal unless the representation is false and it would have a “material adverse effect” on Twitter. This is a famously under-defined term but it generally needs to be a pretty catastrophic effect. If the bots are 6% of mDAUs, whatever. If the bots are 75% of mDAUs and Twitter has been knowingly misleading its advertisers, and Musk can expose that scam and advertisers flee and Twitter faces legal trouble for its fraud, then, sure, material adverse effect. [3] There is no evidence for this at all despite Musk’s months of looking for it. Also it is obviously untrue! Companies advertise on Twitter because it sells products! People use Twitter because other, non-bot people also use Twitter, so it is a useful and enjoyable social network! Elon Musk — who has far more interactions with bots than most Twitter users — is addicted to Twitter because it is full of real people! It’s how he met the mother of some of his children! The pretense that Elon Musk has somehow exposed the secret truth that nobody uses Twitter except himself and some spam bots is just absurd! But we have to keep talking about it! It’s so stupid!

[MichMan]

10. Thanks, I'm not privy to Twitters internal metrics.

Sounds like the number of fake accounts is miniscule. Since I don't use it, not really understanding why they would allow known fake accounts to be active?

[Cha]

14. TY.. This is ON Musk.

Please Fight to Save Our Democracy💙 in 2022 & 2024!

[LetMyPeopleVote]

8. Twitter just hired a big-name law firm to sue Elon Musk for dropping out of $44 billion takeover bid

Wachtel Lipton is a heavy hitter

Link to tweet

https://news.yahoo.com/twitter-just-hired-big-name-201844974.html?ncid=twitter_yahoonewst_sjwumo1bpf4

Twitter has hired Wachtell, Lipton, Rosen & Katz LLP to sue Elon Musk over his move to terminate a $44 billion deal to acquire the app, sources familiar with the matter tell Bloomberg.

The firm specializes in merger litigation and has connections to the Delaware court system, where the case will be tried. Twitter plans to file a lawsuit against the Tesla CEO early this week, the sources told Bloomberg.

Musk himself will be represented by Quinn Emanuel Urquhart & Sullivan LLP. The law firm successfully won a defamation trial for the billionaire back in 2019.

Representatives for Twitter and Wachtell, Lipton, Rosen & Katz did not immediately respond to Insider's request to comment.

Twitter's board said in a statement on Friday that it was "committed to closing the transaction at the price and terms agreed upon," and that it would be pursuing legal action to enforce the deal.

"We are confident we will prevail in the Delaware Court of Chancery," the board said.

Back in the good old days of hostile tender offers, Skadden Arps which represents Musk and Wachtell Lipton were two of the top takeover firms.

[LetMyPeopleVote]

12. Wachtell Lipton is exactly who you would hire in these circumstances: the most famous merger firm

Link to tweet

[LiberalFighter]

19. I would think the judge could order Musk to sell off one of his assets to complete the deal.

[MichMan]

23. If everyone is convinced that Musk will be ordered to complete the original deal

Why hasn't Twitter stock price been going back up close to the $54 bid he made previously ? Instead it has been going way down in value.

[LetMyPeopleVote]

24. I was not impressed with four page letter from Skadden but I love the simple response from Wachtell

There is an artform to a good nasty litigation letter. Skadden's letter to Twitter was four pages and only stated that Mr. Musk believes that there were reasons to claim breach of the Merger Agreement. Skadden's letter was weak because Skadden did not necessarily trust Musk's claims.

Here is Wachtell's response https://www.sec.gov/Archives/edgar/data/1418091/000119312522191300/d370677dex992.htm

By E-mail
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue, Suite 1400
Palo Alto, California 94301
Attention: Mike Ringler
Sonia K. Nijar
Dohyun Kim

Re: Purported Termination of Agreement and Plan of Merger

Dear Mr. Ringler:

This letter is sent on behalf of Twitter, Inc. (“Twitter” or “the Company”) in response to your July 8, 2022 letter, in which X Holdings I, Inc. purports to terminate the Agreement and Plan of Merger (the “Agreement”) by and among Twitter, X Holdings I, Inc. (“Parent”), X Holdings II, Inc. (“Acquisition Sub”), and Elon R. Musk (together with Parent and Acquisition Sub, the “Musk Parties”). Capitalized terms used here and not otherwise defined have the meanings ascribed to them in the Agreement.

Mr. Musk’s and the other Musk Parties’ purported termination is invalid and wrongful, and it constitutes a repudiation of their obligations under the Agreement. Contrary to the assertions in your letter, Twitter has breached none of its obligations under the Agreement, and Twitter has not suffered and is not likely to suffer a Company Material Adverse Effect. The purported termination is invalid for the independent reason that Mr. Musk and the other Musk Parties have knowingly, intentionally, willfully, and materially breached the Agreement, including but not limited to Sections 6.3, 6.8, and 6.10 thereof. The Agreement is not terminated, the Bank Debt Commitment Letter and the Equity Commitment Letter remain in effect, and Twitter demands that Mr. Musk and the other Musk Parties comply with their obligations under the Agreement, including their obligations to use their respective reasonable best efforts to consummate and make effective the transactions contemplated by the Agreement (including by taking all steps necessary to obtain a favorable outcome under the United Kingdom’s National Security and Investment Act 2021), the Bank Debt Commitment Letter, and the Equity Commitment Letter. As it has done, Twitter will continue to provide information reasonably requested by Mr. Musk under the Agreement and to diligently take all measures required to close the transaction.

Twitter reserves all contractual, legal, and other rights, including its right to specifically enforce the Musk Parties’ obligations under the Agreement.

Sincerely,
/s/ William Savitt
William Savitt
Wachtell, Lipton, Rosen & Katz

[ZonkerHarris]

26. If a judge orders Musk to complete the sale I think he will because of the effect not doing it

would have on Tesla and SpaceX stock.
Once shareholders see you ignore a judges order and flout the law your covenant with stockholders is worthless

[jmowreader]

27. I would be VERY reticent about asking for specific performance

If I remember correctly, Elon Musk was planning to finance this deal using two sources of funds: cashing out a large percentage of his Tesla stock then using standard corporate-raider OPM - CDOs, junk bonds, what have you - to backfill the difference between his own money and the price of Twitter.

Problems follow:
First, because Tesla stock started going down in price after he announced this cockamamie deal, the amount of OPM he will need is larger than it was before. Even if he unloads his entire TSLA holding it may not be enough, and he claims to not be willing to do that.

Next problem: Musk's market makers may not have enough money to absorb 17 percent of Tesla, which is what he's sitting on. Hence, more OPM will be needed. (This doesn't consider the effects of the rest of the investment community possibly thinking TSLA isn't a safe investment anymore...what happens if a third of his investors sell their entire TSLA holdings and another third reducing their positions?)

Third problem: Musk completely divesting himself of TSLA, or selling another substantial chunk of it, will have one immediate impact: the stock price is going to crash. The Twitter board members could very well be sued by pissed-off TSLA investors who will claim the reason their investments just went belly-up is because they forced Musk to buy Twitter.

Fourth problem: Elon Musk's income derives from two significant sources: selling expensive cars to liberals and renting rockets to governments and corporations who want to send things into space. Liberals think the guy is a tax freeloader anyway, and corporations really don't want to work with someone as mercurial as he is. If he carries out his fiendish plan to buy Twitter and replatform all the right wingers who've been TOS'd since January 2021, liberals might decide the Ford Mustang Mach-E is a really nice car - it is, but that's another discussion - and the people who launch satellites may go back to ULA or Arianespace.

Fifth problem: Is there enough money in the world to get Elon Musk enough OPM to pull this off? More to the point, is there enough CHEAP money in the world to do it? You can assume there's plenty of more-balls-than-brains money that pays 20 percent interest to do the deal. Musk needs T-bills-plus-50-basis-points money, but the people who have that probably don't want to loan it to a man with a very short history of making profits at all who wants to buy a company that hasn't ever made one. About the only guy out there who could move enough junk in a short enough time to buy this company is Michael Milken, and the SEC banned him from the securities industry for life in 1990.

Sixth problem: As pointed out in the fourth problem, Twitter isn't profitable. This means he has no revenue stream from Twitter's operations to use to pay back his investors. In normal LBOs they tend to raise the money to pay back the investors by raising prices, cutting expenses and selling divisions or assets. Most people use Twitter for free, their biggest expenses - rackspace and software engineering - can't be cut without damaging the brand, and they can't sell anything because there are no "divisions" there and they need their assets to continue their operations. In short, investing $1 billion in Musk's Twitter raid is effectively a non-tax-deductible donation to Elon Musk because, unless he plans to raid Tesla or SpaceX to get the money to make his quarterly payments, he simply won't have the money to meet his obligations. If he raids Tesla and SpaceX the investors in those companies will file suit against the Twitter board because what Twitter made Musk do is costing them oodles of cash. It will probably also send Musk to prison for embezzlement, an issue for another day. However, if he DOESN'T strip his other companies of cash he won't be able to make his payments, so the TWTR junk holders will go after TWTR's board.

Seventh problem: Since this is a deal that won't generate profits, it's also a deal that's doomed to fail. When it does, it may doom the Mergers and Acquisitions industry for all time. You and I may think that's a net positive, and it probably is, but what happens if someone actually NEEDS to unload a company...like, say, the founder is nearing retirement and his relatives don't want the company, and they don't just want to close and throw thousands of people out of work...and no one will buy them because all M&A has ceased? This doesn't happen nearly as often as I think it should. And, naturally, when this happens the people whose money Musk used to buy Twitter are going to come after the Twitter board for forcing specific performance when they knew the Pillsbury Doughboy couldn't specifically perform.

Eighth problem: A Collateralized Debt Obligation (CDO) is a collection of other obligations which form the value of the bond. The underlying is usually mortgage debt. If Twitter immolates because Elon Musk was screwing around and people took him seriously, it could very well collapse the mortgage industry and send the US into an unrecoverable depression.

This is why the Twitter Board should simply sue for $2 billion and not force Elon Musk to buy the company, in my opinion. Naturally, my opinion is that of an interested leftist and not someone with a bird-shaped millstone around my neck, so...they very well may force specific performance simply to get rid of the damned thing once and for all.

[LetMyPeopleVote]

34. Read the lawsuit filed by Twitter

Musk had to get rid of the margin loan a while back and raise more equity.

Link to tweet

https://www.bloomberg.com/news/articles/2022-05-12/musk-seeks-to-scrap-tesla-margin-loan-with-new-twitter-funding

It would also alleviate pressure on Tesla’s stock, which is the cornerstone of Musk’s $216 billion fortune, the world’s largest. The electric carmaker has tumbled more than 25% since he agreed to purchase Twitter, stoking concerns among investors that he may sell even more than the $8.5 billion he’s already disposed of to fund the buyout......

Investors, especially those who specialize in merger arbitrage, have been hyper-focused on Musk’s margin loan since he made his offer for Twitter. That’s because as of June 30, Tesla’s chief executive had already pledged more than half of his shares toward other borrowings, leaving him with a limited amount he could put up for the social-media company and raising the risk that a slide in the stock could jeopardize the buyout.

At the initial $12.5 billion size and after his share sales last month, Musk wouldn’t have had enough unpledged Tesla shares to cover the margin loan if the stock fell below $837. At the current $6.25 billion, Musk could withstand a drop to about $420

As of today, Twitter stock closed at around $45 per share because the merger arbitrage community did not trust the margin loan structure. If the market had confidence in the deal, Twitter's stock price would be closer to the $54 per share transaction value.

I thought that this article was also interesting

Link to tweet

https://www.autonews.com/executives/elon-musk-exploring-new-way-finance-twitter-takeover-without-tesla-margin-loan-report

That, on top of the preferred financing, would be enough to eliminate the margin loan, cutting the risk of the buyout for both Musk and his lenders. It would also alleviate pressure on Tesla’s stock, which has tumbled more than 25 percent since the company’s CEO announced his desire to buy Twitter, stoking concerns among investors that he may further whittle down his stake in the electric-vehicle maker.

The current financing has limited contingency clause and so the financing has to close if Musk is able to raise the equity.

Please read the actual lawsuit. Many concepts were addressed. This is a well pled petition

[LetMyPeopleVote]

28. Here is a link to the lawsuit filed by Twitter

Link to tweet

[LetMyPeopleVote]

33. Twitter is asking for a full trial on the merits in September

Link to tweet

[brooklynite]

41. OPENING ARGUMENT did a good summary of the Specific Performance aspects of the lawsuit.

https://openargs.com/oa610-elons-twitter-deal-was-a-complete-blunder-its-not-happening/