One Clause in Contract May Be Bad News for Musk

'Specific performance' term could be used to force him into buyout deal
By John Johnson,  Newser Staff
Posted Jul 11, 2022 11:31 AM CDT
One Clause in Contract May Be Bad News for Musk
The Twitter logo appears above a trading post on the floor of the New York Stock Exchange.   (AP Photo/Richard Drew, File)

As Elon Musk and Twitter head toward a high-stakes court battle over his decision to bail on the buyout deal, stories have begun assessing the odds of which side might prevail. Generally, most see Twitter with the stronger hand, and a big reason is because the deal includes a "specific performance clause." CNBC describes it as so: The clause "says Twitter has the right to sue Musk to force him to go through with the deal, as long as he still has the debt financing in place." And the debt financing does indeed remain in place. Musk is instead arguing that he can walk away for other reasons, including his assertion that Twitter hasn't provided data he's requested on spam accounts.

Stories at Axios and the New York Times also take note of the clause. And both also cite a court precedent that doesn't bode well for Musk. In 2001, Don Tyson of Tyson Foods tried to back out of a deal to buy meatpacker IBP, but the Delaware Chancery Court—the same court that would decide the Musk-Twitter dispute—forced the chicken-industry giant to go ahead with the merger. Still, the Times notes that Musk "revels in impulsiveness and brinkmanship and is backed by a fleet of top bankers and lawyers," all of which could pressure Twitter into settling for a lesser outcome—perhaps a hefty penalty against Musk or a lower asking price should the deal go forward.

Felix Salmon of Axios also floats what he calls the "big unknown" in his assessment. "What happens if the court forces Musk to buy Twitter, and Musk simply refuses to do so?" In the meantime, an analysis at the Financial Times agrees that Twitter has the legal advantage. "I think we are finally going to see if Elon Musk is 'above the law,'" John Coffee of Columbia Law School tells the outlet. "I am confident that in the Delaware courts the answer is no. The law is fairly clear that you cannot pull out from a deal in the manner he is seeking." (More Elon Musk stories.)

Get the news faster.
Tap to install our app.
Install the Newser News app
in two easy steps:
1. Tap in your navigation bar.
2. Tap to Add to Home Screen.