Twitter gets a win over Elon Musk with trial fast-tracked for October

WILMINGTON, Delaware (BLOOMBERG) – Twitter scored an early win against Mr Elon Musk in its fight to make him complete his US$44 billion (S$61 billion) buyout, as a Delaware judge agreed to fast-track the case with an October trial date.

Chancery Court Chief Judge Kathaleen McCormick on Tuesday (July 19) scheduled the trial for five days in the fall, instead of two weeks in February as the billionaire requested. Twitter argued it was suffering under the Tesla founder’s withdrawal from the deal and disparagement of the social media company.

The ruling marks the first victory for Twitter in a case in which many legal experts say Mr Musk will be the underdog.

In a hearing in Wilmington, the judge made clear she saw little merit in Mr Musk’s scheduling arguments, saying his lawyers “underestimate the ability of this court to quickly process” complex disputes in merger and acquisition cases.

Chancery judges in Delaware, the corporate home to more than half of US public companies, are known for being able to parse legal thickets of complex merger and acquisition disputes more quickly than many other US courts.

Unlike in some states where it can take several years to get a case to trial, the Delaware Court of Chancery generally moves quicker, with cases often argued within five or six months of being filed.

Judge McCormick found that the battle over the teetering transaction was “creating a cloud of uncertainty” over Twitter. “The reality is, continued delays threaten imminent harm” to the company, she said.

The judge told the parties to propose specific October dates for the non-jury trial and wrapped up the hearing – held remotely to accommodate her own case of Covid-10 – in just over an hour and a half.

Twitter jumps

Twitter shares jumped as much as 5.4 per cent after the ruling. They closed up 2.87 per cent at US$39.49 in New York. From the day Mr Musk tweeted that the deal was “on hold” in mid-May, the stock had fallen as much as 22 per cent. It has not traded near the deal price of US$54.20 a share since the first two weeks after the acquisition was announced.

Lawyers for Twitter had said they needed only four days to prove the world’s richest person must honour his agreement. Twitter filed suit last week to force Mr Musk to consummate the deal.

In Tuesday’s hearing, a lawyer for Twitter argued that Mr Musk was “contractually obligated to use his best efforts to close deal”. Instead, he is “doing the exact opposite,” attorney William Savitt told the judge. “He is engaging in sabotage.”

Mr Musk’s legal team has said that Twitter was unfairly pushing for a “warp speed” trial.

Mr Musk said Twitter violated the terms of the buyout deal by not turning over detailed information about so-called spam bot accounts within its system. The case requires a “forensic review and analysis of large swathes of data” about the bots along with other legal issues, Mr Musk’s lawyers said.

Mr Andrew Rossman, a lawyer for Mr Musk, argued at the hearing that there was no need to rush a trial to meet an October deadline specified in the deal. The important date is when the financing commitments for the purchase expire, near the end of April next year, he told the judge. A February trial would give the court enough time to decide the case and leave room for an appeal, he added.

Mr Rossman also dismissed Twitter’s assertion that Mr Musk is trying to run out the clock so that the financing commitments lapse.

Mr Musk has no motivation to harm Twitter, given that he is its second-largest shareholder, he said.