Elon Musk could face a long legal battle with Twitter after he backed out of his $44 billion deal to buy the social media company on Friday, CNBC reported.
Musk signed a legally binding agreement in April to buy Twitter for $54.20 a share, with the billionaire citing disagreements over the number of spam accounts on the platform as his reason for pulling out of the deal.
But according to legal experts, Musk could reportedly face a legal tussle with Twitter in court that could take months to resolve.
Twitter’s board is in a very difficult position, according to Ann Lipton, a professor of corporate governance at Tulane Law School, CNBC said in its report.
“They can’t just say, ‘Alright, let’s spare us the pain, Elon we’ll let you knock the price down by $20 per share, or we’ll settle, we’ll agree to walk away if you just pay the billion-dollar break fee,” Lipton was quoted by CNBC as saying.
“I mean, Twitter is just not in a position to be able to do that,” she added. “Doing so would risk triggering a lawsuit by Twitter shareholders.”
Twitter shareholders have already filed a lawsuit against the company and Elon Musk himself over the chaotic deal, the American news outlet said.
Merger agreements are “very hard to get out of,” and, Musk does not appear to have provided sufficient evidence backing up his claims that Twitter lied about its spam figures, Lipton added.
Twitter’s chairman, Bret Taylor, has also promised that the company’s board will take legal action against Musk, according to CNBC.
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In a letter on Friday, Musk’s lawyers reportedly accused Twitter of a “material breach of multiple provisions” of the deal agreement and claimed the company made “false and misleading representations” about the prevalence of fake accounts on its platform.
For there to be a breach of the deal agreement, Musk would have to prove that Twitter made false statements that would have a long-term impact on the company’s earnings potential, Lipton said in the CNBC report.
“He has yet to put forth evidence that that is in fact the case,” she added.
Twitter will likely file a lawsuit in Delaware and ask the judge to rule whether it violated the terms of the agreement, then order Musk to “perform his obligations under the contract and complete the merger,” Brian Quinn, a professor at Boston College Law School also told CNBC.
Quinn apparently expects both parties will continue to make their arguments in court, as part of a legal process that could take a year to play out.
