Musk had announced his plans to terminate the deal, citing three reasons behind his decision. Firstly, Musk’s attorneys accuse Twitter of fraudulently under-reporting the number of spam/fake accounts. Twitter replied that it did not share additional information with Musk regarding spam accounts because it feared he would build a competing platform after abandoning the acquisition.

Secondly, Musk’s lawyers alleged that the platform failed to provide the required data and information he had requested. As the contract said that Twitter must provide reasonable access to its properties, books, and records.

Lastly, Musk’s attorneys stated that Twitter did not comply with a contract term that required the company to get his consent before deviating from its ordinary course of business.

Musk cites Twitter’s decision to fire two “high ranking” employees, lay off a third of its talent acquisition team, and institute a general hiring freeze as examples of decisions made without consulting him.

In its lawsuit filed with the Delaware Court of Chancery, Twitter called the reasons cited by Musk a ‘pretext’ that lacked merit and said his decision to walk away had more to do with the decline in the stock market, particularly for tech stocks.

Twitter also accused Musk of ‘secretly’ accumulating shares in the company between January and March without properly disclosing his substantial purchases to regulators, and said he “instead kept amassing Twitter stock with the market none the wiser.”

Shares of the social media platform closed at $34.06 on Tuesday, up 4.3%, but sharply below the levels of $50 where it traded when the deal was accepted by Twitter’s board in late April. The stock added another 1% after the bell.

The Delaware Court of Chancery, a non-jury court that primarily hears corporate cases based on shareholder lawsuits and other internal affairs, has ruled on a number of cases where a company cited the specific performance clause to force a sale.

None were nearly as large as Musk’s Twitter deal — $44 billion — and the details underpinning them differ as well.

Still, past cases can provide context for how this Musk-Twitter dispute might end.

IBP vs Tyson Foods

In this 2001 case, Tyson agreed to acquire IBP, a meat distributor, for $30 per share, or $3.2 billion, after winning a bidding war. But when both the businesses suffered, Tyson tried to get out of the deal and argued there were hidden financial problems at IBP.

Judge Leo Strine found no evidence that IBP materially breached the contract and said Tyson simply had “buyer’s regret.”

That didn’t justify calling off a deal, he said.

Strine ruled Tyson had to buy IBP given the contract’s specific performance clause.

Strine wrote, “Specific performance is the decisively preferable remedy for Tyson’s breach, as it is the only method by which to adequately redress the harm threatened to IBP and its stockholders.”

More than 20 years later, Tyson still owns IBP.

The Tyson deal differs in a few key ways, however. Tyson hoped a judge would allow it to walk away from the deal in part because of the significant deterioration of IBP’s business after the agreement was signed.

Musk is arguing false and vague information about spam accounts should allow him to walk.

Also, unlike Tyson’s deal for IBP, Musk’s acquisition of Twitter involves billions of dollars in external financing. It’s unclear how a decision in favour of Twitter would affect potential funding for a deal or whether that could impact closing.

Strine now works at Wachtell, Lipton, Rosen & Katz, the firm Twitter hired to argue its case.

AB Stable v. Maps Hotels and Resorts

In this 2020 case, a South Korean financial services company agreed to buy 15 US hotels from AB Stable, a subsidiary of Anbang Insurance Group, a Chinese company, for $5.8 billion. The deal was signed in September 2019 and scheduled to close in April 2020.

The buyer argued COVID-19 shutdowns caused a material adverse effect on the deal. The seller sued for specific performance.

Judge J. Travis Laster found that hotel shutdowns and dramatic capacity reductions breached the “ordinary course” of the business clause, and ruled that the buyer could get out of the deal.

The Delaware Supreme Court affirmed the decision in 2021.

Tiffany v. LVMH

In another COVID-related case, LVMH originally agreed to buy jewelry maker Tiffany for $16.2 billion in November 2019.

LVMH then attempted to scrap the deal in September 2020 during the pandemic, before it was set to close in November. Tiffany sued for specific performance.

In this case, a judge never issued a ruling, because the two sides agreed to a lowered price to account for the drop in demand during the COVID-induced global economic pullback.

LVMH agreed to pay $15.8 billion for Tiffany in October 2020. The deal closed in January 2021.

Genesco v. Finish Line

Footwear retailer Finish Line initially agreed to buy Genesco for $1.5 billion in June 2007 with a closing date of Dec. 31, 2007.

Finish Line attempted to terminate the deal in September of that year, claiming Genesco “committed securities fraud and fraudulently induced Finish Line to enter into the deal by not providing material information” concerning earnings projections.

As with the Tyson case, the Delaware Chancery Court ruled Genesco had met its obligations and that Finish Line simply had buyer’s remorse for paying too much.

Markets had begun to crash in mid-2007 during the start of the housing and financial crisis.

But rather than going through with the deal, both sides agreed to terminate the transaction, with Finish Line paying Genesco damages.

In March 2008, with the credit market cratering, Finish Line and its primary lender UBS agreed to pay Genesco $175 million, and Genesco received a 12% stake in Finish Line.

Genesco remains an independent publicly traded stock to date. JD Sports Fashion agreed to buy Finish Line for $558 million in 2018.

The post Check out four high-profile cases similar to Twitter vs Musk appeared first on International Finance.

What lawsuit says
“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,” said the lawsuit.

According to the statement, Musk entered into a legally binding arrangement in April of this year and is ending it because “it no longer serves his personal interests.”

The lawsuit accused Musk of “a long list” of violations of the merger agreement that “have cast a pall over Twitter and its business.”

Why Musk canceled the deal
According to Musk, there are mainly three reasons first that Twitter had broken the terms of the agreement by not providing sufficient details regarding spam accounts. Second, Twitter had misrepresented the number of spam accounts in its disclosures to the US financial watchdog and third that the company had broken the agreement by not consulting Musk when firing senior employees recently.

What’s next?
In an effort to quickly resolve its legal matter before the deal’s completion deadline of 24th October, Twitter has asked a Delaware court to set up a four-day trial for its lawsuit in the middle of September. “The facts they marshal in their complaint give them maximum leverage to negotiate should they so wish,” says Brian Quinn, an associate professor at Boston College law school, the Guardian reported.

The post Why Twitter is suing Elon Musk appeared first on International Finance.

The social network business filed a lawsuit against the Ministry’s content-blocking orders under Section 69(A) of the Information Technology Act, 2000 on Tuesday, alleging excessive use of power by government representatives.

Twitter received a letter from the IT Ministry in June requesting that it comply with its directives by July 4 in order to maintain its safe harbour status under the intermediary rules.

What is Section 69 (A) of the Information Technology Act?
The Centre may issue a blocking order to social media intermediaries in accordance with Section 69(A) of the IT Act, 2000, “In the interest of the sovereignty and integrity of India, defence of India, security of the state, friendly relations with foreign states, or public order, or for preventing incitement to the commission of any cognisable offence relating to above.”

Any government request is forwarded to a review committee, which subsequently issues these instructions, in accordance with the regulations governing these blocking orders.

Blocking orders given out in accordance with Section 69 (A) of the IT Act are normally of a confidential character.

Why has Twitter filed this lawsuit?
According to Twitter, many of the blocking orders violate Section 69(A) of the Act due to procedural and substantive flaws. This includes things like removing user-posted content without giving them a prior warning.

Another report claims that MeitY failed to show how some of the content it wanted to be removed was in violation of Section 69 (A).

Twitter has argued that the reasons why the Ministry flagged various accounts and postings are either “overbroad and arbitrary” or “disproportionate” in a number of instances.

According to Twitter, some of the ministry’s flagged content may relate to official political party accounts, and blocking them may violate their right to free speech, a source claimed.

The post Twitter sues Govt of India over content takedown orders appeared first on International Finance.