The lawyerly fun of Twitter's complaint against Elon Musk

Why would you think the WSJ editorial writers are likely to be correct in their analysis? I was frankly shocked that a law professor specializing in securities regulation had a hand in it.

The size of the break fee is well within market for transactions of this sizes, and the payment of such fees has been ordered countless times.

Specific performance is indeed not the most favored remedy - monetary damages are preferred - but court can and will order specific performance and other equitable remedies.

> Twitter might be worse off under his ownership at this point, a fate Twitter’s board is legally obligated to try to avoid.

Not anymore baby, we’re in Revlon land. The Twitter board pursued a cash offer, and their sole duty now is to maximize shareholder value.

> There are also other potential buyers for Twitter.

Narrator: There were not.

> But it isn’t Mr. Musk that promised to buy Twitter, but two entities under his control.

Good thing Twitter has third party beneficiary rights to enforce the committed financing provided to those entities.

> Mr. Musk promised to “cause” these entities to consummate the deal, but a court is unlikely to jail him if he shirks or refuses.

I agree with this statement - the Delaware chancery doesn’t want to put him in jail. But he’s caused enormous disruption for Twitter and it’s shareholders, repeatedly breached the merger agreement and has just acted in bad faith through this process. The chancellor may not jail him, but the chancellor will not be impressed by his antics.

> But the shareholders aren’t party to the agreement. Only Twitter Inc. is a party, and it is a separate and distinct legal entity.

Does… he think that the millions of individual investors are supposed to sign public company merger agreements?

> Twitter would have to prove harm, such as lost profits, and that’s an uphill battle.

Twitter has to do no such thing; that’s what the liquidated damages provision is for.

> Breakup fees are supposed to reflect damages caused by a breach of contract. They aren’t supposed to act as a penalty. Given that Twitter isn’t obviously worse off by $1 billion—if at all—a court might balk at imposing such a high fee.

Narrator: The court won’t balk.

> The easy fix is to give shareholders the right to sue for their losses. But either Mr. Musk’s lawyers were too smart for that or Twitter’s weren’t smart enough.

And the Twitter shareholders couldn’t bring a derivative suit… why?

Just poorly informed, specious reasoning and plainly incorrect conclusions. So, yeah, just about par for the course for the WSJ opinion page.