Earlier this week, Twitter (NYSE:TWTR) announced that it would sue Elon Musk in Delaware court to hold him accountable for his $44 billion, or $54.20 per share, acquisition of the platform. Musk had earlier backed down from the deal, arguing that Twitter’s internal bot estimates of less than 5% of users were inaccurate. However, Twitter argued that it supplied the Tesla (NASDAQ:TSLA) CEO with its “firehose” data, which is a vast data source that details users’ tweets, likes and retweets. Twitter also provided Musk with more data than the acquisition contract required.
In addition, the social media platform points out that Musk made his offer without asking for estimates of bot accounts.
Still, Musk’s legal team states that the data wasn’t enough, explaining:
Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information.
Now, the court date between the two parties has been set for July 19. Let’s get into the details.
TWTR Stock: Mark Your Calendars for July 19
The big question remains: Who has the upper hand in lawsuit? Across the board, Wall Street analysts and legal experts believe that Twitter will emerge as the victor.
Wedbush analyst Dan Ives characterizes the situation as a “a black eye for Musk and horror movie for Twitter.” He lays out four possible scenarios for the case that kicks off on July 19:
- The deal fails and Musk pays a $1 billion breakup fee. Ives adds that Wall Street believes there is a “low probability” of this occurring. Factors that would allow Musk to pay the breakup fee instead of an outright acquisition include a regulatory block by the government and a failure to raise funds.
- The agreement between the two parties contains a “specific performance” provision. This provision states that either party can ask the court to force the deal to close. If this provision is upheld by the court, Musk will be forced to purchase TWTR for $54.20 per share.
- Musk has to settle with Twitter or pay it damages. If this scenario occurs, Wall Street estimates the damages will be between $5 billion and $10 billion.
- Musk wins the court case and pays no breakup fee due to insufficient bot data. Wall Street also believes the chances of this occurring are very low.
Ives has assigned Twitter a fair value of $30. The price target does not include the pending acquisition or potential settlement fees from Musk.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
