First victory for Twitter in its fight against Elon Musk

Posted Jul 19, 2022, 7:46 PMUpdated on Jul 19, 2022 at 8:38 PM

In the fight between Elon Musk and Twitter, the social network has just scored a point. The Delaware judge who will decide the outcome of the trial, Kathaleen McCormick, has just set the trial date for October, for a period of five days.

The social network had asked for a quick trial, to avoid further suffering on the stock market. For his part, Elon Musk argued that it would be necessary to analyze “a mountain of data” to verify the figures of the platform. The judge agreed with Twitter, arguing that some similar lawsuits were concluded quickly.

The social network maintains that “bots” or automated accounts represent less than 5% of its subscriber base. Elon Musk, on the contrary, assures that the company lied to him and that these false accounts are much more numerous. This is the main reason given by the billionaire for his refusal to buy Twitter.

An argument that is probably not enough, according to experts. According to the merger contract that the billionaire signed with the social network, only a “significant negative effect”, unknown at the time of signing, can allow him to escape his legal obligations. This would concretely mean that the number of bots on the platform has a lasting effect on the company’s economic prospects.

A false problem?

According to Twitter lawyers, the number of bots is a non-issue. “This topic that Musk says is going to require a complex review is a fabricated problem, designed to complicate things and cause delays,” said platform attorney William Savitt. “We suspect that Mr. Musk wants to delay this trial long enough to never be held to account,” he added.

The platform believes that Elon Musk’s about-face is more simply explained by the cooling of the financial markets, which has caused the social network to lose its value. “Rather than bear the cost of this market reversal, as required by the merger agreement, Musk wants to pass it on to Twitter shareholders,” Twitter’s attorneys write in the lawsuit.

Twitter on the rise

The financial markets also seem convinced by the arguments of the platform. Twitter stock has been on the rise since it published its complaint on July 13. “Wall Street and many legal experts believe Twitter has a clear advantage in the legal battle against Elon Musk in Delaware,” wrote Dan Ives, analyst at Wedbush Securities.

The judge, Kathaleen McCormick, who joined the Chancery court in Delaware last year, is known for forcing a buyer to complete an acquisition, in circumstances similar to the current trial. Private equity firm Snow Phipps Group was forced to buy Deco Pac Holding for $550 million in April 2021.

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