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Tesla bulls rejoiced when Elon Musk sought to terminate his agreement to buy Twitter. That initial relief has given way to realization the hangover from this ordeal won’t lift anytime soon.
This acquisition has dogged Tesla’s shares from the beginning. There was instant worry the social media platform will divert Musk’s attention away from Tesla and its mission. Fighting for free speech is clearly important to Musk, but it’s also quite a detour from electric vehicles and sustainable energy.
Fears that Tesla’s CEO would have to sell a chunk of his holdings in the carmaker to partially fund the Twitter purchase also were quickly realized when Musk offloaded about $8.5 billion worth of Tesla stock.
In the three months since Musk made his $54.20-a-share offer to Twitter, Tesla has underperformed amid a broader stock rout, shedding just shy of $332 billion of market value. Its CEO is now headed for a potentially protracted legal battle. Ross Gerber, a fund manager invested in both Tesla and Twitter, first celebrated Musk clinching the deal and now calls it a debacle.
Assuming Musk and Twitter are unable to agree to an out-of-court settlement in the meantime, the lawsuit the latter filed July 12 will take time to work its way through the Delaware Chancery Court. Twitter told staff in a memo July 13 that it has asked for the case to be heard on an expedited basis in September.
The odds the two sides will reach an agreement for Musk to pay a cash settlement or reprice the deal seem low, at least based on the position Twitter has staked out since last week. The company has rejected Musk’s allegations that it misrepresented the number of spam bots on its service, vowed to enforce the deal and laid out reasons it believes Musk has operated in bad faith.
Musk also has exhibited a tendency to take on all comers in court. In 2014, long before SpaceX was regularly landing reusable rockets on drone ships, Musk sued the U.S. Air Force for the right to compete for lucrative military launches. It seemed nuts at the time — since when has an upstart rocket company litigated against the very government it’s seeking contracts with? But the two sides settled the following year, and SpaceX has become a major defense contractor.
In 2019, Musk prevailed in a lawsuit brought by a cave diver who played a role in the rescue of a youth soccer team in Thailand. A jury decided Musk calling the man a “pedo guy” on Twitter didn’t amount to defamation.
And earlier this year, a judge at the same Delaware Chancery Court that will handle the Twitter case ruled in Musk’s favor in a battle with investors over whether he improperly forced fellow Tesla directors to accept an overpriced buyout of SolarCity. All other Tesla board members settled for $60 million.
If there’s a silver lining for Tesla investors in this latest saga, it’s that Twitter is mutually eager for swift resolution. Twitter’s lawyers say they may need only four days in court to prove their case, which the company hopes will start on Sept. 19.