Twitter has hired an elite law firm to handle its forthcoming lawsuit against Elon Musk, which could be filed any day now.
After Musk pulled out of his deal to buy Twitter for $44 billion on Friday, Twitter Board Chairman Bret Taylor said the company will sue Musk to enforce the merger contract and force him to complete “the transaction on the price and terms agreed upon.” Twitter then hired the “merger law heavyweight” Wachtell, Lipton, Rosen & Katz to work on a lawsuit it expects to file early this week in the Delaware Court of Chancery, Bloomberg reported.
The New York Times wrote, “Most legal experts say Twitter has the upper hand, in part because Mr. Musk attached few strings to his agreement to buy the company, and the company is determined to force the deal through.” The Times quoted Stanford University Professor David Larcker as saying, “The outcomes are: The court says Musk can walk away. Another outcome is that he is forced to go through with the deal, and the court can enforce this. Or there might be some middle ground where there’s a price renegotiation.”
Another NYT story points out previous cases in which judges ruled that companies had to complete merger agreements but noted that “judges have more frequently ordered damages rather than force a company or individual to buy a company it no longer wants.”
Twitter’s board is also in a tough position, as settling with Musk for a lower amount brings the risk of Twitter shareholders filing a lawsuit, Lipton told CNBC. One shareholder lawsuit was already filed against Twitter and Musk in May; the lawsuit alleged that Musk manipulated the market to drive down Twitter’s value.
“Wachtell Lipton has perhaps the leading litigation practice in Delaware, where the majority of US public companies are incorporated,” the Financial Times wrote. “It defends companies in lawsuits over breach of fiduciary duty and broken merger agreements in the state.”
The Wachtell firm gives Twitter “access to lawyers including Bill Savitt and Leo Strine, who served as Chancellor of the Delaware Chancery Court,” Bloomberg wrote. Wachtell has previously represented Musk and Tesla in other matters.
To defend against Twitter’s lawsuit, Musk has hired Quinn Emanuel Urquhart & Sullivan. “The firm led his successful defense against a defamation claim in 2019 and is representing him as part of an ongoing shareholder lawsuit over his failed attempt to take Tesla private in 2018,” Bloomberg wrote.
Twitter’s stock continued its decline, with a drop of over 8 percent in today’s trading so far. The stock price was less than $34 as of this writing, while Musk agreed to buy the company for $54.20 per share.
The Twitter/Musk deal includes a $1 billion breakup fee that applies in some circumstances, but Twitter can try for more than that. As we’ve written, the merger deal says that if Twitter meets its obligations under the agreement, it “shall be entitled to specific performance or other equitable remedy” to “cause the Equity Investor [Musk] to fund the Equity Financing, or to enforce the Equity Investor’s obligation to fund the Equity Financing directly, and to consummate the Closing.”
Despite Musk’s claims, legal experts say he faces a difficult task in defending against Twitter’s lawsuit. “Merger agreements are ‘very hard to get out of,’ and so far, Musk appears to have provided insufficient evidence backing up his claims that Twitter lied about its spam figures, [Tulane Law School Professor Ann] Lipton said,” according to CNBC.