Todd Henderson Writes that Twitter’s Lawsuit Against Musk is Unlikely to Win
Twitter’s Lawsuit Against Elon Musk Looks Like a Loser
Twitter has sued Elon Musk, seeking to compel him to buy the company for $54.20 a share. Many observers think the company will prevail, or that Mr. Musk is likely at least to pay the $1 billion breakup fee. They’re wrong. He is likely to walk away largely unscathed, a belief reflected in Twitter’s stock price. This case will be a good lesson on the limits of boilerplate merger agreements and the difference between a corporation and its shareholders.
The merger agreement in this case could be read in a way that permits a court to order Mr. Musk to buy Twitter—he and two entities he controls agreed they would “not oppose” such an order—through a remedy known as “specific performance.” Although litigation is always uncertain, it is hard to imagine a court would force the purchase of a $44 billion corporation.
Specific performance is used fleetingly, and for good reason. It is the ultimate act of coercion, and it makes sense only when there is no alternative. If one agrees to sell Hearst Castle, but tries to back out when a higher bid emerges, a court may specifically enforce the contract. There is only one Hearst Castle, and no other remedy can make the jilted buyer whole.
Read more at The Wall Street Journal