The news was reported by the New York Post citing a source close to the case: Elon Musk plans to file a countersuit against Twitter.
Elon Musk seeks to fight lawsuit initiated by Twitter
After his refusal to finalize the deal to buy the company for $44 billion, Musk is being sued by Twitter shareholders who are trying to force him to finalize the deal.
Today, Tuesday, 19 July 2022, the first hearing in the Delaware court of this legal battle will be held, as Twitter has asked for a speedy trial, while Musk is trying to avoid it. The company is aiming for the start of court proceedings as early as September, while Musk hopes to delay it until February.
One of the ways to try to avoid the start of the trial as early as September could be precisely to countersue the company so as to put more meat on the fire, perhaps forcing the court to have to take more time.
The New York Post reports that Musk’s lawyers are trying to persuade the judge in the Delaware Court of Chancery to give them more time so they can gather more information about the bots on Twitter. The issue raised by Musk in refusing to go through with the deal is precisely the overestimation of the social network’s official data about the actual number of active users, because many of these would actually be bots that are completely irrelevant from an economic standpoint.
The Post also speculates that a lengthy legal battle against the company could cause its shares to lose further value on the stock market, thus giving Elon Musk more leverage to possibly try to renegotiate the purchase price downward.
Before the announcement of the company’s intention to buy the company at $54.2 a share, their stock price was around $40. After rising above $54, it fell again, to the current $38. A further collapse would probably be required to offer less than $54.2 a share.
Musk has 20 days, as of last Tuesday, to file counterclaims with the court, so a possible countersuit could come over the next few days.
Professor Miller’s thoughts on the possible implications of the trial
According to University of Iowa corporate and financial law professor Robert T. Miller, it would be likely that the judge might grant Twitter‘s request for a speedy trial, so the possibility of a countersuit seems decidedly plausible.
Miller used to work at Wachtell, Lipton, i.e., the law firm representing Twitter, and he also does not expect that the possible countersuit would reduce the likelihood that the judge would opt for a speedy trial. He claims, however, that if Musk produces new arguments it could potentially buy additional time.
In the event of a speedy trial, Twitter’s lawyers will aim for a four-day trial to be held in September.
However, the Post also reports that some legal analysts do not expect the court to end up ordering Musk to complete the Twitter purchase.
Miller says that even in the event of a peremptory order from Core, Musk could refuse to physically sign the documents to close the acquisition, and in that case Delaware would have to appoint an official called a “special master” to act on his behalf. At that point, the court could also fine Elon Musk, or possibly even sentence him to a prison term.