NAGA : Twitter Officially Sues Elon Musk in Delaware Court for Violating its $44B Merger Agreement

The action will likely set the stage for a drawn-out battle as the company seeks to have the Tesla CEO follow through to pay a $1 billion break-up fee.

Earlier, Elon Musk had reached a preliminary agreement to buy Twitter. However, the deal did not take place, because the billionaire accused the company's management of providing untruthful information about the number of bots among all registered users of the social network.

According to the terms of the preliminary contract, Elon Musk is obliged to pay $1 billion and must forfeit in case of refusal from the deal. The head of Tesla believes that the deal was derailed due to Twitter's fault.

Because of the protracted dispute and lack of agreement, the head of the social network decided to go to measures of last resort.

Details of Twitter's lawsuit against Elon Musk

"Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, 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 says.

However, Musk, the CEO of Tesla and SpaceX, argued that Twitter breached the agreement by not disclosing details about how it estimates the number of spam accounts on the platform. Twitter estimated in the first quarter that fewer than 5% of Twitter's 229 million daily users were fake or spam-focused, but Musk thinks the number is much higher. The billionaire said getting that information was an important part of understanding Twitter's business, which makes most of its money from ads.

Twitter said in the lawsuit that Musk was well aware that there were caveats to the data, and the agreement said that the information he requested must be for a "reasonable business purpose" related to completing the deal.

Both sides concede that the trial will be a long-term one. Nevertheless, it could cause reputational damage to everyone involved.

Let's take a look at how these events have affected Twitter's stock price.

How the lawsuit affected Twitter's shares price

Twitter's stock chart, July 2022

Worldwide litigation has negative consequences for everyone involved. This is what happened in this situation.

As soon as it became known about Elon Musk's intention to buy Twitter stock, the company's securities rose by about 5% in just a few days. Investors took the news positively in anticipation of updates and investments in the social network.

Accordingly, the public rejection of the deal led to a decline in Twitter's stock price. Specifically, Twitter's share price stood at about $32.64 on 12 July trading closed - falling further below the $54.20-a-share takeover price agreed by Mr. Musk and Twitter's board in April. The public controversy led to a decline in the value of the shares by almost $20*.

*Part of the loss may be due to other economic factors.

How the lawsuit could impact Twitter and Elon Musk's companies

The result of the lawsuit may affect not only Twitter's stock price, but also Elon Musk's company. This is a reputational battle, so there will be no winners or losers. Under the merger agreement, Twitter and Musk have until Oct. 24th to complete the deal. Accordingly, around that date, we will be able to find out the outcome.

Twitter's victory and forcing Elon to buy back the company's shares at the pre-agreement price could spark another investor's interest. This could bring the stock back to its previous range of around $50. Losing to Elon could negatively impact Tesla's value because it is a reputational blow to the head of the company.

Accordingly, a Twitter loss could mean that the company's stock price would not return as quickly to previous levels.

However, market factors can impact these predictions, so be cautious and use NAGA trading opportunities with a rational approach.

Summary

• Twitter sued billionaire Elon Musk after he told the company he no longer planned to buy the social network for $44 billion.
• Musk's attempt to back out of the deal has raised concerns about the social network's future.
• The result of the lawsuit may affect not only Twitter's stock price, but also Elon Musk's company. This is a reputational battle, so there will be no winners or losers.

Important Notice: Any news, opinions, research, analyses, prices, or other information contained on this feed are provided as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and therefore, it is not subject to any prohibition on dealing ahead of dissemination. We do not make any warranties about the completeness, reliability, and accuracy of this market commentary. Past performance is not an indication of possible future performance. Any action you take upon the information on this feed is strictly at your own risk, and we will not be liable for any losses and damages in connection with the use of this feed.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. A high percentage of retail client investors lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.