Can Elon Musk be forced to buy Twitter? Here’s what we know

Mildred Europa Taylor July 13, 2022

Twitter is suing billionaire Elon Musk to try to force him to buy the social media company. This comes after the South African-born disclosed on Friday that he was terminating his proposed takeover of the platform for $44 billion.

According to the Tesla boss, Twitter had failed to give him information about how many bots or fake and spam accounts it has on the platform. Twitter is now asking a Delaware court to order Musk to complete the merger at the agreed $54.20 per Twitter share.

“Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, [Mr] Musk apparently believes that he – unlike every other party subject to Delaware contract law – is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away,” the lawsuit said, adding that Musk had violated the merger agreement and this has “casts a pall over Twitter and its business.”

The lawsuit further accused Musk of walking out of the deal because it “no longer serves his personal interests”.

So now, can the courts or Twitter actually force Musk to buy the platform?

Twitter’s value is largely based on the number of human users on the platform. And so if there are more bots as compared to human users, Twitter’s worth would be less. Twitter had estimated in its SEC filings that bots are 5% or less of Twitter accounts. Musk said he made his offer based on those filings but now alleges that the actual number of bots could be as high as 20%.

He wants out of the deal, but that will not be easy under the merger agreement with the tech firm. Experts say that Musk may argue that Twitter intentionally did not give him the “real” number of bots it has on the platform and that could be interpreted as fraud. Musk could walk out if he could give proper evidence of fraud. But this could be difficult. Twitter had earlier indicated that the number of bots was less than 5% and stressed that the actual figure could go higher.

Musk may also depend on a “material adverse effect” clause in the merger agreement. A “material adverse effect” is a change in circumstances that negatively affects the value of a company. According to, “Musk may argue that had he known that the actual number [of bots] was as high as 20%, he never would have offered to buy Twitter, much less at the price he did.”

But has there been any shift in circumstances considering Twitter emphasized in its filings that the number of bots could be higher than the 5% it mentioned?

Musk may have to prove the occurrence of a material adverse event in court. “We remain cautiously optimistic that Twitter can enforce the agreement though realize this could drag on for some time,” analyst Aaron Kessler wrote on July 11. “At this point, we believe the onus is on Mr. Musk to prove a material adverse event has occurred.”

Specific performance

A court can order a person to pay monetary damages if they breach a contract. “If monetary damages would fail to put the seller of a company in the position it would have been in if the deal had gone forward, a court may in certain cases order the buyer to actually go through with the purchase. This doctrine is called specific performance,” explains. The merger agreement comes with a “specific performance” clause that could force Musk to close the deal.

In other words, if Musk tries to shun the deal, Twitter could ask for specific performance.

“There’s never been anything this high-profile that touches on specific performance,” Mark Boidman, head of media & entertainment at Solomon Partners, told Yahoo Finance before Twitter filed its suit on Tuesday.

Boidman said there are just not a lot of cases of this size or scale where the court comes through and forces the parties to execute the deal. “That said, if the court finds there’s a breach I can’t imagine that the court won’t make the buyer go through with the deal just because of the size.”

The merger agreement includes a $1 billion breakup fee. The party that causes the deal to fall apart would pay the other $1 billion. Musk would likely pay his $1 billion breakup fee and more in a brokered settlement with Twitter, experts say. Twitter may take the settlement money and think twice about litigation.

Twitter’s share price has fallen more than 8% in the past month, according to the BBC. Musk could be seeking a better price for Twitter while Twitter could also be looking at having a lump sum to end the saga, as pointed out by experts.

“One resolution is for Musk to pay Twitter an amount that reflects the loss from Musk not completing the purchase,” Ronald Gilson, professor of law and business at Columbia University, told Mashable. “The fight is ultimately about money.”

Last Edited by:Mildred Europa Taylor Updated: July 13, 2022


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