a Twitter thread from @SpecialSitsNews
@TwitterVid_bot1.
1/ Why Elon could be in for a tough slog $TWTR $TSLA:
Delaware courts, where the dispute is set to be litigated, have set a high bar for acquirers being allowed to simply abandon their deals. "Misrepresentation of spam accounts" may not be a material adverse effect (MAE)...
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2/ Twitter $TWTR could potentially have the upper hand here, but like other targets, may eventually choose the certainty of a renegotiated deal at a lower price or financial compensation rather than a lengthy court battle that could last for years.
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3/ Based on our analysis of deals since 2000, only 10% of litigated deals end up being done at original offer values, but ~40% tend to go through post-litigation at lower valuations. This stat is even higher for Delaware deals... Maybe this is Elon's goal all along for $TWTR?
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4/ MAEs are usually very drastic, unexpected events that can cause lasting harm to a co's performance. Only one deal over past 5 years has had MAE triggered, German takeover of Akorn by Fresenius in 2018. Fresenius had lied about its regulatory status and financials. $TWTR $TSLA
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5/ Despite denying it, Musk was obviously interested in $TWTR for financial reasons as well and soon realized he was overpaying dramatically. He didn't need to sign the merger agreement if bots were an issue. Potentially bot # inaccuracies were already published as risk in 10K.
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6/ Elon also alleges that $TWTR breached the merger agreement by firing 2 senior employees, the head of revenue product & its general manager of consumer, without consent. While this is a slightly better argument, I doubt a company with $1.7bn of EBITDA can't replace a manager...
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7/ Delaware courts usually find in favor of target companies and order acquirers to complete deals [often at a lower price], a legal remedy known as specific performance. In 2001, this is what happened when Tyson Foods reneged on its purchase of IBP, Inc., a meatpacker.
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8/ Specific performance was a remedy in a more recent deal during Covid as well, when the French Retailer $LVMH threatened to walk away from a deal to purchase Tiffany & Co. Ultimately, LVMH agreed to lower the price by $425mn to $15.8bn.
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9/ Also during Covid, Simon Property Group $SPG, the biggest U.S. mall operator, was able to cut purchase price of controlling stake in rival Taubman Centers Inc by 18% to $2.65 billion, but still had to complete the deal. Settled in Michigan Court. $TWTR
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10/ Another resolution could be asking $TWTR to walk away in exchange for financial compensation beyond the $1bn breakup fee, that board could use to authorize a share buyback. This happened when Channel Medsystems sued Boston Scientific $BSX for trying to walk from $275mn deal.
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11/ In conclusion, Elon may have deep pockets and could litigate for years, but in the end, there is precedent in Delaware courts for an outcome that could potentially favor $TWTR. This is only commentary, not a forecast & all we can do is wait and see like the rest of you all!
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