When Elon Musk attempted to cancel his agreement to purchase Twitter last week, Tesla bulls celebrated. The initial sense of relief has given way to the knowledge that the burden of this experience won’t soon disappear.
Since day one, this acquisition has followed Tesla’s stock price.
There was immediate concern that Musk would become distracted from Tesla and its goals by the social media platform. Musk clearly cares about defending free speech, but doing so is a significant diversion from his work on electric cars and renewable energy sources.
Fears that Elon Musk, CEO of Tesla, would have to sell some of his company stock in order to help pay for the Twitter acquisition quickly came true when Musk sold shares of Tesla stock valued at about $8.5 billion.
Tesla has underperformed amid a wider stock rout in the three months since Musk made his $54.20-per-share offer to Twitter, losing just shy of $332 billion in market value. Now facing a potentially drawn-out legal battle is its CEO. Ross Gerber, a fund manager who owns shares in Tesla and Twitter, initially applauded Musk for sealing the deal but now refers to it as a failure.
It will take time for the Delaware Chancery Court to process the lawsuit Twitter filed on Tuesday, assuming Musk and Twitter are unable to reach a settlement outside of court in the interim. Twitter informed its employees in a memo on Wednesday that it had asked for the case to be heard quickly in September.
According to the stance Twitter has taken since last week, the chances that Musk will agree to pay a cash settlement or to restructure the contract are slim. The business has refuted Musk’s claims that it understated the number of spam bots using its service, vowed to uphold the agreement, and given explanations for why it thinks Musk acted dishonestly.
Musk also has a history of challenging everyone in court.
Musk sued the US Air Force for the right to compete for lucrative military launches in 2014, long before SpaceX was routinely putting reusable rockets on drone ships. At the time, it seemed absurd — since when has a fledgling rocket company filed a lawsuit against the very government it is attempting to do business with? But after reaching a settlement the following year, SpaceX has grown to be a significant defense contractor.
A cave diver who assisted in the Thai youth soccer team’s rescue sued Musk in 2019, and Musk won the case. A jury determined that Musk’s tweets referring to the man as a “pedo guy” did not constitute defamation.
In a dispute with investors over whether Musk improperly coerced fellow Tesla directors into accepting an exorbitant buyout of SolarCity, a judge at the same Delaware Chancery Court that will hear the Twitter case ruled in Musk’s favor earlier this year. The settlement for the other Tesla board members totaled $60 million.
If this latest saga has a silver lining for Tesla investors, it’s that Twitter is eager for a quick resolution on both sides. Twitter hopes to begin trial on September 19 and that their attorneys will only need four days to present their case.
