Lawyers at thirty paces for Tesla, Twitter

Company News

by Glenn Dyer

The legal battle lines between Twitter and Elon Musk are being drawn up and an initial engagement could take place as soon as this week.

Twitter has hired major US law firm Wachtell, Lipton, Rosen & Katz as it prepares to sue Musk and force him to complete the $US44 billion acquisition of the social media company, according to people familiar with the matter.

Musk, the chief executive officer of Tesla, on Friday terminated his deal, saying Twitter had failed to provide information about fake accounts on the platform, after which Twitter’s chairman, Bret Taylor, vowed a legal fight.

Twitter is planning to file a law suit early this week in Delaware, people familiar with the matter said.

The Financial Times explained why the firm had been hired – “Wachtell Lipton has perhaps the leading litigation practice in Delaware,” regularly defending companies in lawsuits “over breach of fiduciary duty and broken merger agreements in the state.”

Wachtell, Lipton, Rosen & Katz was also one of the legal advisers for Musk’s plan to take Tesla private in 2018. Musk tweeted that there was “funding secured” for a $US72 billion deal to take Tesla private but did not move ahead with an offer.

Musk and Tesla each paid $US20 million in civil fines, and Musk stepped down as Tesla’s chairman to resolve US Securities and Exchange Commission claims that he defrauded investors. Former Telstra CFO Robin Denholm was named to replace Mush as chair of the EV maker.

Twitter’s existing legal team includes Simpson Thacher & Bartlett LLP and Wilson Sonsini Goodrich & Rosati.

Musk’s main law firm is another of the blue-bloods of American corporate legal warfare and defence – Skadden, Arps, Slate, Meagher & Flom.

US analysts point out that Musk has been quiet since Thursday on the subject of Twitter. He appeared at the Sun Valley media and entertainment talkfest on Saturday night and talked about a lot of things, but not Twitter.

The usual approach for these law firms is to litigate like hell in public while pushing their clients privately towards some sort of deal that all parties can live with. In this case it would be a lower price for Musk’s bid, or a lower break fee, along with other concessions.

But Musk is so unpredictable, that any deal might end up problematic and hard to enforce if he changed his mind and rejected a settlement.

The continuing investigation of Musk’s share buying and tweeting in Twitter looms as perhaps the major threat to the bid and Musk’s equanimity.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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