In a last minute twist in the high profile proceedings, Elon Musk has offered to complete his proposed US$44bn (£38bn) acquisition of Twitter on the proviso that the social media platform halt the legal proceedings against him.
The parties were due to battle it out in a Delaware court on 17 October after Musk withdrew from his deal agreed back in April to purchase Twitter, citing misrepresentation of fake accounts on the service.
Is this really that surprising? In many ways, no. Whilst it is not immediately clear why Musk has chosen to abandon his fight, its timing possibly comes in view of a deposition re-scheduled for 6 October, which Musk may have wanted to avoid.
In my view, there are generally four reasons as to why a party would want to settle proceedings at this late stage rather than risk their day in court:
- Firstly, a change of position regarding the risk of losing at trial. In considering all the circumstances of the case, Musk may have been advised that his chances of successfully defending the proceedings were not as strong as first thought. This can happen for a variety of reasons, from weaknesses in evidence, or last minute disclosures. This generally feeds into (2) and (3).
- Secondly, the costs risk of proceeding to trial. If Musk were to lose, he would be ordered to follow through with the deal agreed in April in any event and could be ordered to pay Twitter’s costs. Whilst this is the general rule in the courts of England and Wales, the position is not as straightforward in the US and varies on a state-by-state basis. However, the Delaware code makes provision that generally the prevailing party is to recover the costs of the suit by order of the court.
Arguably, this is likely to have had little weight in Musk’s decision making as one of the current richest people in the world. Musk is more likely to have been considering the potential third reason.
- Thirdly, the reputational risk of proceeding to trial. Whilst the monetary risk of proceedings may not weigh on Musk in the same way it usually would to litigants, he is likely to have considered the reputational damage if he were to lose the court proceedings. Not one to have shied away from litigation in the past, Musk is likely to have considered the public consequences, particularly in view of the other high profile cases seen before the courts this year, that have in some instances, irretrievably damaged reputations. A settlement avoids this risk.
- Finally, certainty. With a settlement comes certainty, with Musk not reliant on the decision of a judge. Further, a settlement frees him from his obligation to attend the deposition and scheduled trial to pursue his other endeavours, including most recently the Tesla Optimus robot.
There will no doubt be numerous logistical hurdles (including financing) to overcome beyond the legal hurdles faced by the parties in concluding proceedings and putting the settlement into effect. I await with interest confirmation as to the settlement being concluded between the parties.
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Billionaire Elon Musk has apparently changed his mind about buying Twitter, again, and is now willing to proceed with his takeover of the social media platform.