Yet Another Value Podcast - Professor Ann Lipton and Compound248 on $TWTR vs. Musk

Episode Date: August 9, 2022

Tulane Law Professor Ann Lipton and Fintwit personality Compound248 discuss the latest in Twitter’s lawsuit against Elon Musk. Note that we dive directly into all the nuisances of the trial; for more background on how we got here and what’s at stake you can listen to my podcast from May with Evan Tindell.My May pod with Evan on TWTR: https://twitter.com/AndrewRangeley/status/1529452942931238914?s=20&t=7yi3kr0wvPY0nduenfVdSAProfessor Lipton's Twitter: https://twitter.com/AnnMLiptonCompound's Twitter: https://twitter.com/compound248Chapters0:00 Intro2:40 Overall case thoughts to date6:40 Will Elon's "unclean hands" prevent him from breaking the deal?9:05 Is Specific Performance the right remedy here?12:30 How Musk's tweets are undercutting his own case16:30 Can the court see to the heart of the mDAU arguments?26:00 The looming discovery fight28:05 What can we read into the judge's actions so far?30:30 The timeline for resolution if this goes to trial and appeal36:15 What happens if TWTR has an MAE between now and court resolution?38:30 Why is Musk referencing Texas law?48:10 Is the India lawsuit an ordinary course breach?50:05 Does Elon waiving due diligence have any impact on the case?53:15 Elon's consent rights55:55 Does how the contract evolved overtime matter?56:30 Does Elon continuing to add to his counterclaims impact his credibility?58:30 A little more on mDAUs1:00:45 Elon's threat to start a competitor in the merger negotiation1:02:25 The billion dollar damages cap1:08:45 Financing tail risk1:12:15 Odds of a settlement

Today's podcast is brought to you by Delupa. Delupa's database of over 2,500 models contains the most KPI's for each company, along with non-gap adjustments and guidance specific to the business and the quarter. Clients use Delupa's existing data to construct their own models faster and ramp up on new names more readily. Coupled with Delupa's plugin, which automatically updates numbers and formatting within your model, you'll never need to input numbers manually again. All of the LUPA's data points are contextual, audible, and accurate. Their AI algorithms allow them to collect the most data on their companies at the greatest speed

and build out their model database at a rapid pace, while their final layer of human analysts ensures total accuracy of their models. You can even update KPIs for multiple different companies in an industry model that allows you a bird's-eye view for better idea generation. Save time with Dilupa to do more value-added work. No more data errors, no more Excel monkeying, just the fundamentals, all at your fingertips. all right hello welcome to the yet another value podcast i'm your host andrew walker if you like this podcast it would mean a lot if you could follow rate review it wherever you're watching or listening to

it uh with me today i'm happy to have two guests on one side i have my friend compound and on the other side kind of the star of this podcast today i have two lane university professor and lipton and compound how's it going great Happy to be here. Going so well, and I'm excited to be here. Thanks, Andrew. Hey, thank you guys so much for being here. Let me start this podcast the way I do every podcast. First, a disclaimer to remind everyone that nothing on this podcast is investing in advice.

So everyone should please remember that, consult a financial advisor, do your own diligence. And then the second way I start this podcast is with the pitch for you, I guess in this case, my guests. I'll start with Compound. I've known Compound for a while. I consider him a friend. He's a super sharp investor and I swap notes with him. sometimes multiple times a day.

And then the second pitch is for Professor Lipton, who, look, my colleagues and I, I told her before the show, I'm a little starstruck because when she started going on CNBC and doing all these hits, we were like, oh, this professor is really good. And then I noticed that she was from Tulane, my alma mater, my alma mater. So I'm just glad that she's on here. I'm glad that she's representing the universe so well and really excited for this podcast. So look, I'll just do a quick overview. we're talking midday on Monday, August 8th. This is a wild case over the weekend. It may have gotten even wilder. So things could change between talking about talking and posting. But just to start, we're going to be talking about Twitter versus Elon Musk. And I guess just to start an easy question, I'll turn it over to Professor Lipton. What is your take of just the overall case, everything we've seen so far? I think everything we've seen so far, it does not look like Musk has much of a basis for finding that Twitter breach the merger agreement. It seems that he's,

His claims against Twitter are very weak. Twitter's claims that Musk is the one who is breaching the merger agreement seem pretty strong. So a lot of the debate, the X factor for a lot of those of us were watching, is less about who's right, because it seems that Twitter is right. And more about what the court does about it. Does the court actually order Musk to close, or is there some other outcome? compound do you want to add anything to that yeah i mean i guess one of the areas i'd love to get your thoughts on um professor lipton is is that if musk is in breach what are the implications of that and how in breach does he need to be for it to be relevant to this case um i mean well i mean it's not

It really is about, it's not about how much he has an obligation in breach. It really is just, he has an obligation to sort of close this deal. And what the parties did, at least, you know, the sort of obvious reading of the contract, and there are people right now studying to see whether there are alternative interpretations, but the obvious reading of the contract is that are essentially there are two pads here. If Musk is in breach, Twitter can do two things. It can terminate the agreement and ask for a billion dollars from Musk, obviously it is not doing that, or it can sue Musk for specific performance, which is a contract term to mean go through with it, go through with your obligations. And that would mean getting the financing, doing all, you know, whatever preliminary things are necessary to close the deal.

And then finally, actually closing the deal and buying the company once a shareholder vote has voted in favor, which that's scheduled for September 13th. I'm pretty sure the shareholders are going to vote in favor. So those, at least a surface rating of the contract is essentially the only two outcomes. And the contract, the parties agreed very clearly that nobody can be forced to pay more than a billion dollars under the contract. So the question that a lot of people have is, I mean, a court always has discretion to not order specific performance. It's considered an equitable remedy, which basically means it's when the court's power considering whether the court thinks it's appropriate, whether the court, you know, wants to exercise that kind of, you know, compulsion over the parties.

So the question then is whether the court really will think specific performance is appropriate here, given the importance of Twitter, given, you know, all the different equities of the situation. And if the court doesn't think it's appropriate, does the court stick to the contract, which seems to have the party saying a billion dollars, that's it, which would really be a win for Musk? I mean, that that's pocket. And for me, a billion dollars would better a lot. But for Musk, it really doesn't. And it's far better than him having to pay $44 billion. And I would say that the disruption he's caused to the business, the expense, the trouble, everything else is probably worth much more than a billion. So if he gets to walk away for just paying a billion dollars, that's a win for us.

It is a loss for Twitter shareholders. And so the question is whether the court really perceives itself as constrained by those two options, whether there's a third option. I mean, it doesn't look like there was one under the contract. And whether there's a reason the court would think specific performance is inappropriate in this case. She's ordered it before. Delaware courts have ordered it before. The question is whether the court's willing to do that now.

And I guess one other, just on his breach, there's obviously the breach of he's not making best efforts to close the deal. He's inappropriately terminating. But Twitter sort of alleges, doesn't sort of allege. Twitter alleges that he's been in breach for months. And I guess it says the implication of that is that if he has been in material breach since, call it May, he's actually barred. from terminating the agreement. And I'd love your thoughts on that as well. Yeah, that's definitely in the agreement. The agreement says that you can only exercise your termination right for someone else's breach if you yourself have complied with all your obligations. So one of Twitter's arguments is, look, we didn't breach at all so you can't terminate. But even if we did, you can't terminate because you breached first. Now, the grounds for breaching first are largely things like, first of all, his tweets, you know, bad tweets. He tweeted.

He insulted a merger agreement, which he's not supposed to do. He violated the BNDA on Twitter in a minor way, which is not supposed to do. Those are the really obvious. He's just short of challenging Twitter CEO to a duel, like at this point. I would, got to say, I would be surprised if the court said, Twitter, you are in breach of the agreement, but the reason I'm not. not letting Musk terminate is because of the bad tweets.

Like, I just don't see that happening. The more serious claim the Twitter has is that he's not using his best efforts to get financing. And the thing is that that's a little opaque. It's really, like, all Twitter's got so far is that essentially communication is sort of stopped. So I just can't really game out how likely that is. But I think it's, you know, so it's possible that this whole thing will be short cut by the court saying, Well, I think that Musk breached first, therefore, it's not allowed to terminate the deal. But I think it's more likely that the focus will be on Musk claims as to why Twitter breached first.

Can I ask a question? So there's just so much I want to ask here. But on the bad tweets, like, I agree. I don't think the courts are going to be like, hey, we're going to enforce a $44 billion merger, even though we found Twitter breached the rest because Elon did some nasty tweets first. Like, I do have trouble with that. But one of the things I constantly heard people when we first started looking at this case was a lot of legal people would say, hey, you're drilled from day one in law school.

Like, courts really don't like to order specific performance. And specific performance has been ordered. This judge has ordered it before, but it is pretty rare. But one thing, I mean, I think the judge said, she, I know she said during the expedited trial hearing, hey, in this case, it does seem like monetary damages would not help Twitter. But another thing that just keeps coming to mind is like, like, Elon keeps doing all these bad tweets that are harming the business. And they increase the odds specific performance needs to be the remedy.

Do you think that he's almost harming himself by making specific performance more likely just by continuing to tweak these things? Okay. So it's actually two separate things. I don't think the tweets are about specific performance. I think the tweets matter, but they matter for a different reason. Okay. But as far as the first part, yes, if you go to law school, they will tell you specific performance is a rare remedy. The preferred remedy is damages.

But this is Delaware. This is a merger agreement in Delaware. and that actually isn't what's been going on in Delaware. Delaware has actually laid out a much simpler standard for when specific performance is appropriate and which basically is about the equities of the situation. It isn't even, and the courts are defer a lot to when the parties have contracted to say specific performance is appropriate

and they did in this case, they contracted to say specific performance is appropriate and Musk even contracted that he couldn't argue specific performance is not appropriate, like as in, he's allowed to argue he's not in breach, but at least under, again, plain reading of the contract that I haven't studied it the way I'm sure lawyers are right now to find the hidden clause somewhere in the hundreds of pages. But the straightforward reading of the contract right now is that if she finds him in breach, he is not allowed to make an argument that specific performance is inappropriate.

So despite the fact, and in fact, I am unaware of any case in doubt, there haven't been all that many. they're alone like five or six. But I am not aware of any case in Delaware where the parties contracted for specific performance. And the court said, nope, not awarding it. So we've got several of these broken merger deals. And where they said specific performance, the court said, okay, yeah, specific performance is it. So I don't think that despite the sort of black letter doctrine that specific performance is the rare remedy, that's not really how it's been playing out in the merger cases in Delaware. The tweets, however,

are a problem for a different reason. And that is, he's making a lot of admissions in his tweets that contradict his filings, which is why I'm sure Wachtel is sitting down and documenting them and is having a lot of fun doing it. And Scotton is doing the same thing and having a lot less fun. Because he's basically making statements

that really contradict a lot of the assertions that his lawyers are making in his filings on his behalf. So those are gonna be labeled as exhibits. And that's the problem. Just on that, I was wondering, and we're talking August 8th, and over the weekend, Elon went on a real Twitter rampage, it included he challenged a Twitter CEO to a public duel on bots. He said a lot of things. He again and called for the SEC to investigate Twitter, like things that he should not be doing. His lawyers, obviously, they don't want him doing this, but do they have any leverage over him? Because I was kind of thinking I've been involved in some court cases before. If I did this, I think our lawyers would have just said, oh, this guy who's paying us a couple thousand dollars, like, we're just going to fire him as a client. I don't think Scaddon's going to do that because Elon's paying some big bills, but do they have any leverage? Can they bring him in at all? Yeah, I mean, if he's not going to listen, he's not going to listen. I mean, one of the things that really actually I think is

going to trouble, I don't want to overstate because I don't want to say we're at that point because I don't think we are. But Twitter, Skadden and Quinn Emanuel, they're representing Musk, they're making filings in court on Musk's behalf with factual assertions that this is what happened. This is our story of what happened that led to this where we are now. If Musk tweets out things that contradict that, say, oh, no, that's not how it happened. Now we have like an ethical problem. And that's the concern that has to be in the back of Scadden's mind. That, you know, he hasn't, we haven't crossed that line yet, but we're walking up to it. And this is, and leaving aside the fact that he's damaging the legal arguments that Scadden spent many hours putting together,

or point in manual. I don't know who did one. Can you give an example of something Elon's tweeted that goes against something his lawyers have argued? Because these things, like you, people tweeted them over the weekend, but the filings are so long, it's almost hard to remember what gets argued. And can you just give one example? Yeah. So, Musk has a number of different claims, like basically a couple of different bases for why he gets to walk away from the merger. One of the bases, arguing is fraud. Twitter defrauded me. Now, to prove fraud, he's to essentially prove three things. First, Twitter made false statements. In this case, he's claiming false representations about the amount of spam on the platform. Second, that he relied on those

false representations. And third, the Twitter intended to do it. Okay, those are the three thinks he has to show. So the big claim here that he spent, there were multiple paragraphs in the complaint about, in his filing about this, his counterclaims, is that he relied on Twitter's representation that there was no more than 5% spam on the platform, that he believed in his bones, he believed in his heart, his soul rested on there was only 5% spam on the platform. And my God, he would never have signed this deal if he'd known it was more. So when he tweets out, does anyone who uses Twitter think there's really 5% spam on the platform? He's basically saying no reasonable person could even have a casual interaction with Twitter

and come away thinking that there was only 5% spam on the platform. And he's made that point multiple times in multiple places that a casual use of Twitter will reveal that that 5% number can't possibly be true. But he has pages and pages of sworn filing swearing that he believed it. he made it he made it two weeks after the merger agreement he went i think was the all-in podcast he went on and he said twitter says it's only 5% bots does anyone have that experience and i mean this was within the ink wasn't even dry on the contract and he was saying that which again i i think just speaks to exactly and that's and that's what he did over the weekend as well

he tweeted out this poll and the poll was is there 5% spam yes or no except it wasn't yes or no it was yes or LMA, lapping my ass off, no, which the implication, obviously, the joke being nobody could possibly think there was more, you know, and he's tweeting this out days after his attorney spent a lot of time drafting documents, you know, a very that must truly believed and was horrified to discover that it was actually, in fact, more than 5%. You know, I think one thing when I talk to people, a question that frequently comes up, I call this almost the must trap. They'll say, oh, but, you know, I don't think 5% of users on Twitter aren't bots.

Like, I think it's more than 5% just based on my interaction. And I always see, that's not, like, must does a nice job if you do a casual read of switching you over that. But what Twitter is saying is our MDAUs, monetizable daily active users, we're saying it's under 5%. And I guess one, it's like two different questions, but will the judge be able to read through that? because, again, a casual observer has issues with that. And is the judge almost going to look at all this and say, Elon's making a mockery of the court and come down harder on him for trying to pull these card games where he's switching the definitions of users and bots and everything?

I don't think, you know, I think she's trying very hard to treat this like any other case. And I have seen their examples where people have treated the, you know, have been pretty defiant, the Delaware reports. in Delphorts have been, in some ways, bizarrely tolerant of antics. So I actually don't think she's, you know, I think she's trying very, very hard to treat this like any other case and not worry about whether he's taking him seriously or not, but just look at the legal art.

But I think, yeah, I mean, I don't think it's about, like, the switching of the definitions. I think it's really, it's more like, he wants to, his goal is to turn this into a really complex, computer dispute over what is spam and how you can't spam and what the definition is. And Twitter's goal is to say, we have a contract here. We made statements that are really very straightforward. They're not 5% spam.

They're 5% monetizable daily active users. We were very clear as to how we were defining that. And we didn't say that we only had 5%. Then we said we had a process for assessing it. We used our judgment. We might be wrong. And you can, if Musk think our numbers are wrong, but that's fine, but we never represented our numbers or anything in particular. We said that we used a process which produced this number.

And Musk has very few arguments to refute that statement, the statement of we used a process by which we reached this number, which, by the way, we could be wrong because we used a lot of judgment. Like, that is the statement that they made. And Twitter is going to spend a lot of time saying, you can't false. that by talking about, you know, your own, you know, redo a spam analysis. It just doesn't answer the question. And may I add, Anne, I mean, at no point has Twitter made any sort of representation around its actual MDAU number specifically, right? All they've done is represent that their SEC filings are correct in all material respects. And that happens to be one number that is embedded in those SEC filings, and actually, I guess it's really just the 2021 10K that is the only meaningful

repped SEC filing. So I guess that comes down to, even if he somehow were able to say, well, it's actually 10%. What is the threshold for materiality? Because it's sort of like a number embedded inside a document that itself is reped. Okay, yeah. So this is where, so Twitter is not at this point arguing that the actual numbers of its monetizable daily users are not material. Like it hasn't reached that point. Like it's not saying, well, you know, all these other numbers in our documents. Why are you focusing on monetizing? You know, like they're not doing that. They're not doing that. They're not doing that. But it has said we did, we have never rep spam bots or. Yeah, it's just spam. They did, they did make statements about the number of monetizable daily users. And they're not saying that that's on the show. But this is complicated because Musk has different legal. claims and how we judge what's material varies depending on the claim. So it's not all the same answer. The most basic claim is a contract claim. You made a representation about your

SEC filings being true. And you're right, essentially one SEC filing, the 2021 10-K. You made a representation about that being true. And he's claiming, and it is not true. There. But under the contract, the very contract, it says, this is true, but it also says, even if it's not true, Musk does not get to walk away. He only gets to walk away under the contract if it's both not true and so dramatically awfully out of not true that it would likely to have, the legal term is, a material adverse effect, which means a long term significant impact on Twitter's finances going forward. So if Musk wants to, under the contract, Musk cannot win simply by showing that the SEC filing was false, and in this case false in terms about the number of spam or not even the number of spam, the process for assessing the amount of spam, you'd have to show that it was so dramatically false that it was likely to have this long-term material effect on Twitter's finances going forward. He makes gestures in that direction in his, in his counterclaims, but he's barely, really barely trying. He's really mostly like, if this got out, it would have a material long-term effect, which is, I mean, part of the reason why I think Twitter didn't redact anything, because it's saying it's out now, I think we're fine. So that's the first claim. The second claim he has is for fraud.

That claim does not require the material advert. effect. That requires reliance, and we already have this reliance problem, and intent by Twitter, which, I mean, really, his only intent allegation at this point is, you can see by the way they tried to hide things that they intended to defraud me. And then it's really, material is a much more loose standard that would really just have to be about something a person could reasonably rely on. I don't, I'm not in a position to say whether 5% versus some other number, is material. I think at that point, it's really, Twitter's going to say, look, we only said we had a process. We never said anything more than that. And also, you didn't rely, as we can see,

by your Twitter antics. Then we get to the third claim, which is the Texas claim. It was my next question. I'm so glad. Yeah, the Texas claim. And the Texas claim materiality, I assume, and I'm not a of Texas law, but in this context, it usually just means something that a reasonable investor might rely on. And that, well, you kind of have to understand the background of the Texas claim before you can even start to unpack that. So do you want to talk? Before we full-on hit Texas, can I ask one more question just about? So you kind of laid out that Elon wants to make this about spam and bots and data, and Twitter just wants to say, let's read the contract,

you know, apply the contract here. So to me, that sort of lays out a looming battle around discovery and what will be discoverable. And you see Twitter sending out a massive subpoenas trying to figure out, did Elon try to muck his own financing? Was he using best efforts? I presume what Elon would like to do is use the trial as a way to somehow disprove the MDAU number, right? Like, let's just, so how do you see the judge, how do you see the chancellor sort of drawing the line on what will be discoverable? Like, what are the smoke signals we should be looking for to see how that's trending? It's really like, I mean, I know how I rule if I were the court, but I'm not the court. So I'll just say this is what we're looking for.

And what we expect at some point, I mean, like, who knows, Twitter might say, you know what, I'll give you everything. But I think that's less likely. I think at some point we're going to see a discovery battle where, you know, Musk moves for some kind of computerized information and Twitter refuses and then Musk files some kind of motion to compel. That seems likely to me, at very least plausible. And at that point, the parties will have to explain why they need this data. And Twitter will argue it is both irrelevant because we didn't make a representation about spam on the platform.

We made a representation that we had a process and we showed you our process. We gave you that. And Twitter will also make an argument that this is just unduly burdensome, which is a thing in discovery. Like you can't, like that's a certain point where it's a fishing expedition

and you're just harassing the other party or it's just the trouble that that party would have to go to, to get that information is simply not worth it given the likely probative value at court. And the court is a terrific amount of discretion to make those kinds of rulings. So what I mean, I'm going to be watching for is if and when we have a fight over how much computer data Twitter has to turn over, how the court rules. Does the court accept an argument that this is really not going to be all that probative

and certainly is a lot of trouble for Twitter to produce, which is a really good sign for Twitter, or whether the court's like, yeah, you know what, maybe there's something there, in which case, that's a bad sign of the court. It would suggest that the court is at least willing to entertain some kind of spam hunt. If the judge is looking forward to an appeal and just like making sure all our eyes are dotted, teaser cross and everything, might the judge just say, hey, yeah, let's play this out all the way. Go ahead. Go crazy. Get all the discovery you want, do whatever you want. And then like, so it'll look kind of like a bad thing for Twitter. But I've heard people say, hey, you know, we've had conversations around this case. find specific performance, all this. Like, maybe the judge just wants to button up everything and then make a ruling, which I think will probably be in favor of Twitter and then kind of limit the appeals.

I think that's a very real possibility, but I got to tell you, and that's how I thought about it originally. And now, and this is really just me, you know, sitting here, you know, eating my popcorn and gaming it out. The reason I think that's actually not how it's going to play out. Well, it's two reasons. First of all, there's a certain point where it really is a cost to Twitter. and trouble to Twitter to turn over a lot of information, and she just thinks it's unnecessary. There's a point where she's not going to torture Twitter with that real burden.

But it's also the way she's been running the case so far. We've had now a couple of different skirmishes in court, and she could not have been clearer in the nature of her rulings about the scheduling, about who gets testified, what, that she is just refusing to tweet this is the extraordinary case that it is because the fact is, as a legal matter, it's not very extraordinary. It is extraordinary because of the facts, because it's playing out in this bizarrely public fashion, because of the personalities involved, because of the high-profile nature

of the company, that's what makes it extraordinary. The actual legal issues here are not extraordinary. And so far, every indication she's given has been, I refuse to let the weird public spectacle hijack how I run my case. And if that, and that's the signal she's been sending so far. So if that's right, she's not going to do a, everyone's watching, I'm afraid of an appeal, therefore I'll let Musk go nuts with discovery and then hammer him in the actual rulings. I think she's going to make discovery rulings that she actually thinks of the appropriate ones from the case. The three things I've read into so far, like that she might be leaning in favor of Twitter or at least Elon's got a really long kill is she granted the expedited trial,

which I think the facts of the case absolutely called for. Everyone talks about at the end of the expedited trial, she said it's not at all apparent that damages could constitute a sufficient remedy if Twitter prevails, which means she would lean towards specific performance. And then the third thing was the when determining the musk on sealing issue earlier this week, she said rules are rules. And then that let Twitter actually get their counterclaims to Elon's response. Their response to Elon's counterclaims out before Elon's counterclaims were even, which I know drove you crazy. It drove me crazy. It was wild. I understand my Twitter did. I can't read a document that way.

I refuse to read it. But am I right that those are the three things you're referring to where the judge is saying this is a normal legal case? And maybe it says she's leaning the way Twitter wants her to be looking at it. It's not so much, yeah. I mean, not so much. It's simply that, not just that. Also, she put out a scheduling order.

And she limited the parties to 25 interrogatories at that point, as I understand it, Musk had already submitted 68. So she was... Knowing Musk, I'm surprised there wasn't one more. Yeah, yeah. So I think... So it's not so much that she's leading in Twitter's favor. She literally has no facts before.

I mean, she's not blind. She can see everything that we're seeing. But it wouldn't shock me if she's making a studious effort to avoid too much public reporting because she doesn't want prejudice how she thinks about the case. But so I wouldn't say leaning towards Twitter. It's more like refusing to treat this as different than any other busted deal. And if that's right, it means that she is going to be disinclined to order a metric ton of discovery simply to establish something publicly.

She's aware that there's public interest. She's allowing the public access to what's going on because the public is right to that. But that doesn't be she's going to allow that to hijack question guns and forth. I wanted to dive into some of Elon's other counterclaims, but was there anything else on everything we've talking about? Do you want to ask? Well, I was just going to say, I think it will be relevant to the counterclaims. But before we move on to Texas, maybe just a chance to touch on what her,

if it goes to trial on October 17th and ends on the 21st, what a reasonable timeline would be for us to expect. a ruling and then a quick glance into the appeals process. I think people tweet at me all the time that, oh, you know, Elon's going to tie this up in court and appeals and countersuits for years and years. There was a New York post. Absolutely. Yes. So I know you have some thoughts on that and maybe you can help sort of set the record straight for us. Yeah, no, I do have that to that. after trial we're not going to get a verdict there is a post-trial briefing process and a post-trial argument process and she specifically referenced that when she set the schedule she is quite aware

she hasn't actually scheduled anything on that but she is quite aware that there will be briefing and there will be argument i don't want to guess how long it will take but it won't be long it women people are there a month, and then she'll issue a ruling after that. I mean, I've already put a number on it. It won't be more than a month. I would be very surprised for it more than a month. I really don't know. But like, she is aware that there's this April looming deadline for when the lender's

commitment expires. Now, that actually doesn't necessarily mean she can't still order must to, you know, basically say, hey, you made a promise your financing ran out sucks to be you. But obviously, to make things easier, they're going to want to. Delaware is going to want to get this done before the financing expires. Delaware, their brand is getting these things settled quickly and not being things like financing expires because the court couldn't make a decision. I mean, that is contrary to everything that the reason that Delaware exists, they're just not going to let that happen. So she's very aware that there's a time

construct. There will be post-trial briefing quickly after trial. There will be oral argument and there will be a decision. I mean, they can move very quickly when they want to, but I would be surprised if it were more than a month after the end of trial. Now, a normal appeals process can take several months to resolve, but there are expedited proceedings in the Supreme Court, just as there are in the trial court, and the Delaware Supreme Court can easily set a briefing schedule of a month or so. I mean, I just don't, so I can imagine this playing out to early next year, but I don't think the Delaware courts have every interest and capability of getting this settled well before that April 2023 financing expiration. And then when if he loses that, he's going to appeal to the

U.S. Supreme Court, right? Appeal to the U.S. Supreme Court, but that doesn't stay the judgment while it goes on. You know, that's, you know, I guess that's something like a three month or multiple month process. But I mean, look, I guess if the Supreme Court decides to step in, stay the judgment, which would make, which could easily, while, I mean, that could happen. I mean, like, as in literally it could happen. But, I mean, the idea that the Supreme Court wants to get involved in Delaware corporate law in this case, I mean, I just can't see any of these more. Yeah, my impression is the Delaware Supreme Court is the final arbiter on chancery decisions.

Yeah. Pretty much full stop. And we're assuming an appeal. So, like, if this is a right down the middle, facts of the letter, hey, this was a merger, contract, simple buyers are Morris, Elon closed. The Delaware Supreme Court might even refuse the appeals process, right? They might say there's a appeal of right. But what they could do, if they want to make it clear, um, that they think very little of most claims is issue essentially when a lot of the time, the Delaware Supreme Court issues essentially a one paragraph order.

We affirm the chancery for the recent stated below. They could do that. Um, but there, I mean, if he wants to appeal, he gets, he gets his shot, he gets to brief it. And then it's a bit relevant from an investment perspective. If that appeal does go on, sort of the odds of a supersidious bond being required in the sense that in order to appeal, Elon would have to post up to $44 billion to appeal. I don't know what your thoughts are on that. Well, I mean, yeah, so she's not going to make him like, okay, let's assume, again, the Twitter won and that she ordered its visible performance. Obviously, this is a different

conversation or something else happened. But if she, she's not going to order that he closed while the appeal is pending. I mean, obviously. She even made that clear in the transcript where she set the schedule. She said she was making, she was thinking in terms of time for it. So the standard would be to require some kind of post bond, you know, as assurance that you really will perform if you lose the appeal. Honestly, though, $44 billion is so unprecedented that I honestly have no idea. I mean, courts have required $44 million, but that's a different number. So I honestly don't know whether she would actually demand the full amount or security for the

fullness. It's just one comma, professor. A popular parlor game among investors has been, okay, what if the financing falls through at some point, right? Or, look, this, the trial happens in October. The appeals process runs through, let's say early January. What if an MAE happens in November for some reason, right? Q3 earnings are an absolute disaster. Twitter gets hacked and the website's down for two months and all the users flea or something. Popular polar game has been what happens if the MAA happens after the trial, after the break? I just wanted to ask, like, what would happen if the lenders tried to walk away

after the trial or if Twitter had an MAE after everything had happened. Okay. So first of all, okay, so if Musk brings it about and if the trial is the reason for the MAA, it doesn't count as an A. I think though, if it just like, you know, something else happened, you know, that really had nothing to do with Musk or anything else, I actually think that, you know, his obligation to close is conditioned on the absence of an M&E. So if something happened, and it really was unrelated to him, that could get him out of it. And it's one of the reasons he has one of his motivations to delay. Like maybe there isn't any now, but what if there is later, that really has something to do with him.

That said, I honestly, like, I would have to look at a contract again and I just don't know, whether there's any kind of argument that him delaying counted as bringing about such that it doesn't count or something. That was my question. Because he would have to close the Twitter merger vote is mid-ceptive. he'd have to close within a couple weeks after that. Like if the MAE happened October 31st, wouldn't Twitter have the argument? Well, you didn't improperly. I have 100% no doubt they would make that argument,

but I just don't know whether that would really, that would really qualify it. But I think the stronger argument for them and likely the successful one is that this simply didn't count as an M&E because, you know, I mean, the idea of something really coming up out of the blue that really had nothing to do with any of. this and is not already carved out of the merger agreement. Like, it doesn't count if it's an industry downturn. It doesn't count if it was like a computer, a hack. There are so many things

that don't count as an NIE. I mean, the idea that something is going to happen in the next couple months. And, oh, no, like, Musk was saved by essentially divine intervention. I mean, it could happen, sure, but I think it's really unlike. Some people would say Elon's been saved by divine intervention. If people want to bet on the divine intervention, they should go ahead and do that. Compound, anything else you want to ask here, or I did want to go to some of Elon's other things in the counterclaims. I think that's a great path. Great. So, and two of the things that jumped out to me, look, I've read contracts, but obviously I'm, I've read lawsuits, but obviously I'm not a lawyer. Two of the things that really jumped out to me were Elon's claims of, he mentioned he would be a Texas citizen in the Texas state law that you started to discuss. And I think we said we were going to come back to. And then the India government suit stroke me as a little weird.

So I guess could we start with Texas and then maybe go on to the India government piece of it? Sure. Okay. So, Musk is looking. Okay, so first the question that's come up is whether the Texas plan is somehow a bid to have this hurt in a Texas court? No. This is in a Delaware court. It's going to stay in the Delaware.

I mean, like we can think of all kinds of crazy scenarios. But the fact is the parties have a really firm contract that any disputes arising out of the contract get hurt in Delaware court. Courts tend to enforce that pretty clearly. Delaware's not letting go of this case. So the law that you apply is a separate question than the court where it's heard. So recently, just before McCormick, she decided a case where she had to interpret Italian law and she got Italian law and she interpreted Italian law and she applied courts to do that all the time because lots of cases involve laws of a number of jurisdictions. One court hears it and they look it up. So what his bid here is not to move the case into Texas, it's to have Chancellor McCormick apply Texas law.

And the reason he wants to do that is because he thinks Texas law would be more favorable to him. And this is where things get weird. Okay, so first, as I said before, his two main claims are that contractually he's allowed to walk away because Twitter made a misrepresentation and fraud. Both of those require that Twitter have made a misrepresentation, but they require more than that. Under the contract, they require that there have also been a material adverse effect as a result of the statement. Fraud doesn't require a material adverse effect, but does require that he have lied and that Twitter have intended to defraud him. The reason he thinks the Texas law is more favorable to him is because it doesn't require any of those extra things.

It only requires falsity. So the reason he thinks he can get, he can, he can somehow, I think, sort of a Hail Mary, but Texas laws, because if Texas law applies, it would say he gets to rescind the contract purely for material falsity. And this comes back to the question before about what material counts in this, what material would be in this context. I haven't looked up Texas law. However, I would say that most states borrow from the federal standard.

And the federal standard would be, that would be reasonably important to, you know, that is substantially important to a reasonable investor, something else substantially likely to be important to a reasonable investor, which is a relatively light standard or just important, not even necessarily. So I say that back to you, Texas just says it has to be wrong or false, whereas fraud says it has to be wrong, there has to be intent, and there has to be reliance. Correct. That's exactly it. That's exactly it. So that's why he wants Texas law to apply. Now, let me explain what this Texas law is. It's called a blue sky law.

Almost every state has one. It is basically state securities regulation. Most of the time we're talking about securities regulation. We're talking about federal law. Almost every state has their own system of securities regulation just for that state, basically to regulate the sale of stocks and bonds in the state these days, cryptocurrency. And they are there to protect retail investors for. being defrauded. I mean, that's what they're there for. They're there for, you know,

your crooked broker who makes the sweet old lady buy some bizarre speculative investment. I mean, that's what these laws are there for. They are not for major deals of a public company merger. So the first thing Musk would have to, so one thing Musk would have to show is that somehow when the Texas statute refers to offers and sales of stock, that this merger contract counts as the kind of transaction it was intended to apply to. Now, by its terms, very possibly, I'll let Wachtel do the research and make that argument. But so that's one of the issue, but certainly Wachtel will argue something along the lines of this statute is not here for that. It's not there to deal with major merger agreements between public companies. It's there for,

you know, the sweet old lady who got swindled out of her life savings. But the biggest issue, like the most obvious issue is, does Texas law even apply here? Like, why is Texas even having it? Because Blue Sky laws apply territorially. They apply to conduct within the state. And one thing I'm, and again, I haven't, you know, gone down the deep end of Texas law, but one thing I'm pretty sure of is near residence in Texas is not good enough. Like Texas law is not a bubble that follows Musk around wherever he goes, protecting him, no matter where he does anything. There has to be a connection between, the transaction and Texas, there is literally nothing in the complaint, and I mean, no,

I mean, did the word search that would suggest anything about this transaction has anything to do with Texas. Now, Twitter knows where this transaction took place. Musk knows where this transaction took place. And when I say took place, I mean, where was the contract sign? Where were the negotiations held? Where were discussions held? Where did Twitter make any representations that Musk now says are false?

And by the way, the mere fact that Twitter has an SEC filing that's out there, that isn't good enough. It would have to be something with the word. So I don't know where this deal was negotiated. I know it was negotiated, but neither party has said where they know, certainly. So Twitter knows how to gauge this. But the thing is that if Musk had the goods, this really, it took place in Texas, you would expect that to be in the complaint. He would have said, and I negotiated this from my Texas home. And afterwards, we had barbecue and rolled a mechanical bull, like, whatever.

It's a salt lake. We had some great brisket, yeah. Exactly. I was wearing a bowl of tie. You know, that we'd be all over the complaint. And there is not one word. So I find the idea that Texas had law here to be a reach. The other issue is that, you know, as we've just said, Delaware has really well-developed standards for when people can walk away from mergers.

And the idea that Delaware is going to say, well, actually, there's this one weird trick. Here's how to get out of a public country, $44 billion transaction, strikes me as implausible. Right. The sense is every buyer going forward will stand in Texas when they sign their contract. The fact is every state, almost every state has a law kind of like this. I assume he chose Texas to not say California, which would at least be more plausible, is because his attorneys did the research and found something on favorable in California law. And the AG there has been friendly to him. As in, that was my first thing. The AG has been friendly to them. If you can somehow get it to Texas, you can make it really policized and maybe the AG just leans on some quartered.

But you're saying, I don't see how this gets. I mean, look, I can't, after a certain point, we're gaining out scenarios that they're so have never happened. I can't gain them out. But courts tend to respect forum selection clauses. This contract has a, really strict. This is heard in Delaware forum selection clause. And I'm not even sure how it would get your addiction over Twitter and Texas. So I just don't see how this gets into a Texas court, but like, you know, we're reaching a point of does he, if he uses every possible means of his disposal to get out of it, I don't know, you know, like I can't believe. So speaking of Hail Mary's, I mean, I guess he's, he's sent one to India. That was where I was going to do next. Let's go to

that because it jumped out to me in the contract that I'll just let Professor Lippton talk about it. Okay, so this is another place where his own tweeting gets into trouble because I said his tweets undermine the allegations in the complaint. The most obvious way is by making it clear that he never relied on this spam representation. The other thing is that over the weekend, one of his tweets was this is really just about how they sample 100 a day. The only issue in this case is how they sample 100 a day. If only they would explain that, this is over. Yeah, he said, I will close the deal. Yeah. So, because they have this huge strategy to bring in every fact they possibly can to turn this into a big computer expert thing. And let's just said, the only thing that matters

is this 100 per day count. So, of course, Wachtell, and when it defends Twitter, is going to say, And they've been saying all along that all of these complaints are pretext. And now they're going to use that as an exhibit A that this new thing about the India lawsuit is pretextual. You know, he just said on Twitter, he doesn't care about the India lawsuit. Okay, but let's ignore his tweets. One of the promises that Twitter made in the contract is a very standard promise. The target agrees to operate in the ordinary course of business between signing and closing. For obvious reasons, if you're going to buy a company and you sign a contract,

by a company. We won't actually close for a few months. You don't want the company like making major changes before you have a chance to get in there. You don't want them selling off all their assets and paying out massive bonuses. So all companies promise to operate in the ordinary course between signing and closing. So Musk has been, he threw in this India a lot like this philosophy of Twitter filed, I guess, about censorship in India. I don't even know the details, to say that this is yet another example of Twitter not operating in the ordinary course of business between signing and closing that gives him a basis to walk away. So how powerful is that? Not very. First of all, it's all in the wording of the covenant. What exactly did Twitter promise? And what Twitter

promised was to use commercially reasonable efforts, efforts to operate in the ordinary course that are commercially reasonable. So among other things, we're going to say, given our interest, this was a completely commercially reasonable thing to do. And one of the other arguments that they make, is that they filed suits like this before. Like Twitter has always been very, you know, as a company has been pretty protective of the free speech of its users in some ways, of the privacy of its users in some ways. So one of the arguments that Twitter is already setting forth is this is just how we do our business. This is our ordinary course. We do this all the time.

This may have been a new lawsuit, but it's what we do. This is just how we've been running our business. And, you know, I don't have a whole lot of facts about this particular dispute. I always don't want to, you know, I will just say that all we have between the. the very friendly wording of the covenant in the merger agreement and the nature of Twitter's business, I don't see this, and not to mention Musk's own admissions that he doesn't care about the Indian lawsuit. I don't necessarily think that that is particularly a dangerous ground for Twitter.

I can't play in two ways because this will hit another bird with this stone. So the India lawsuit, they filed it in July, but the dispute had been brewing for over a year. So I guess the two questions would be just on the India specific dispute, the fact that it had been brewing for over a year, does that help Twitter's case? And B, the fact, it comes back to Elon waived all due diligence. And one thing you'll frequently hear people in Twitter's even starting to say this is Elon waived due diligence. He could have investigated the India merger. So I did just want to blend it into the broader. Does Elon waiving due diligence have any impact on this merger? Yeah, it does. But I don't necessarily think it has any do with the India lawsuit. I think it really

has to do with the information issue. So one of the things that Musk is arguing is that he's entitled, then I think we said this before being, he's entitled to information. He's entitled to information that is, you know, for a reasonable business purpose related to closing. That information right is a right he bargained for. The kind of information he's being, he's been demanding of Twitter now, essentially prove your spam, you know, substantiate your numbers. That looks like due diligence, not, you know, facilitating closure. It looks like due diligence. So when, so the argument that Twitter has is making, and that I think, you know, it's in a stronger position here, is that it does not have to turn over all of that spam information. It is not violating the merger

agreement to not turn over that spam information because it is outside the scope of the information rights that he contracted for, and you can see court, says Twitter, he's really trying to shoehorn in a due diligence that he refused to do before. So that's one way. The other way that the due diligence really matters is, remember, the fraud claim requires Musk show that he relied on the false statements. So Twitter's argument is, Exhibit A for how we know Musk didn't rely is because he did no due diligence. He's insisting this representation was everything to me. It was the heart and soul of why I agreed to this deal. And Twitter's like, if that's true, why did you take this incredibly vague statement we made about us having a process and do no due

diligence at all? It's just not plausible that he relied on it. So I think it actually, it partially goes to whether he's abusing the information rights he does now. And it goes to whether or not, he is credible when he says that he relied on these representations. Just on that, I was laughing during the expedited hearing dispute when Elon's lawyer was like, it's going to take months and months of discovery to get to the bottom of this. And I was laughing because it's like, it took you less than a month to get to a $44 billion merger contract. And I get everything's different.

But I was just laughing at the disparity in timelines there. Compound, were you going to say something? I think the chancellor laughed at that as well. when she told them, I think I'm able to handle it with, you know, on a faster timeline than they applied or were asking for. But I was going to say on the ordinary course rep or promise, I guess the other angle that Musk is pursuing is around personnel issues, you can terminate, you put on a small hiring freeze, et cetera.

And there doesn't seem to be much there there other than, I guess, Twitter has submitted to Musk for approval several seemingly small business decisions. You know, can they repay their revolving credit line and things like that? So I guess if I'm Musk, I can say, well, you have been asking me. for approval for certain business decisions, and yet you've made these other business decisions without asking me for approval. And those seem pretty important to me. You've been inconsistent. You've shown that you understand this term, and yet you violated it. So maybe you could dig in there a little bit. I mean, he's going to argue that. And I mean, I'm looking at, I just don't think it's

very persuasive because Twitter's argument will, of course, be as a courtesy, we wanted to run all this stuff by you, but that doesn't change what our contractual obligations are. And Delaware tends to be very, you know, this is what the contracts is. So, I mean, I don't, you know, so my, again, I mean, it's pretty obvious that I'm pretty sympathetic towards Twitter's general position. But, I mean, for example, again, the ordinary course covenant promises it's going to be used commercially reasonable efforts. So first of all, it's going to say a hiring free, I mean, it claims it wasn't a hiring freeze, but whatever. The personnel stuff was, they're going to say this was commercially reasonable given the environment. Second, there is Delaware precedent on this

precise point that says, when you say commercially reasonable, what you mean by that is look to peer companies. Well, look at every company, every one of the tech companies now, including Tesla, which is the first one that Twitter's going to trot out, has instituted some kind of hiring freeze. On Elon's gut, they instituted a hiring freeze. Yeah, exactly. So they're going to say commercially reasonable under Delaware law means look to the peers and this, and look to our peers. Fine. The other thing is that it doesn't just say commercially reasonable efforts to operate the ordinary course. It says that if they get to ask Musk for permission to make changes and Musk shall not unreasonably withhold it. So the next thing they're going to say is he just ghosted us.

He didn't even say no. There was just like weeks of like no. So they're going to say he was unreasonable in withholding it. But I mean, I don't even think we get that. And then they have a whole contract drafting history where apparently recording to them, And they allege he wanted to put in the contract that he got hot, certain control over hiring, firing, and Twitter got him to take it out. But I actually don't think we get that far. I think we stop at commercially reasonable efforts, and this is commercially reasonable.

Can I just say, even though you don't think we get that bar, I was just curious because I think Musk originally said, hey, I get approval rights on any hirings and firing over the VP level, and Twitter removed that in there in the eventually approved version. Do courts look at that contract drafting language and how they start they start by the plain language of the contract and they all turn to that history if they find the plain language ambiguous, which is why I think we start with the plain language. And that's why I'm not even sure we get to that. I want to take it. Compton, unless you have anything here, I want to take a big jump to another question. I guess just the very last thing on the counterclaim. So he terminated and when he terminated, he gave three reasons. And when he five, this counterclaim five weeks or a month later, a few things got added in, India, Texas, et cetera. My understanding from you is that that's totally fine other than it may have an impact on his credibility and sort of a pretextual view that the judge might have. I mean, I think his termination letter explicitly said we reserve all rights, but I mean, just as technical matter. But yeah, I don't think, I don't think the court. It's going to say, you know, like too late, you're stuck with what you put in the July 8th letter.

If he has grounds to terminate, he can terminate. The problem is that, you know, he's saying you, when he says, like, he has some new claims now about lying about the actual humans or the monetizable users. And I think the, you know, and I relied on all those representations. And there's a credibility problem here when it took months before he was complaining about completely different things. and now he's got a whole new basis for complaining. It's just, it's just, it doesn't look like this is a real reason. And I think, but I don't think it like he's legally barred from trying. I have to joke that, I mean, it is the funniest thing to me in the counterclaim was that

he managed to say that MDAU is both the most important thing. And actually, it's really not that important to Twitter's business, which I just couldn't, I cannot figure out what was going on. There are places, I mean, they're just, yeah, I mean, this is why, I mean, I'm reading it, and there's a certain throw everything of the wall, which I kind of get, but there are parts where he would have been better to leave out certain allegations because they seem to undercut other allegations, like the thing about how he thinks that this metric is a ridiculous metric, it doesn't mean anything, except he was also willing to spend $44 billion in reliance on it with no description in Twitter's filings about what it actually was. I mean, that just, you know, on its face. He makes a big thing about 70% of MDAUs generate almost no revenue, but then he also says, MDAUs are the only thing I care about. It's like, it just, it can't be both if you think they're a joke. Well, no, I think the argument is, and actually, this is why, you know, Twitter did a pretty baller move here. The, the, the, the, what he's

claiming is that I, of course, assumed when you said you had all these monetizable daily users, I assumed that that meant they were all seeing ads. And I was shocked, shocked when I got your internal documents to see that, in fact, 70% of them or whatever the number is, didn't see the ads. And now, the first problem, of course, with that argument is that Twitter never said that the word is monetized a bull, not monetized. I mean, they never said that they all seen the ads. What they said would, you know. So it's already a leap to claim that he was misled. because there's this fact that they didn't disclose.

They disclosed. They had users. They defined that really specifically. Like, real people who log in from it. You know, they're very clear on how they define it. They never defined it to mean saw ads. So already, to claim fraud or even a false statement from this is a reach because he's saying, I assumed that they would all be seeing ads.

And it's shocking to discover 70% or not or whatever figure is. But the next piece of it is he argues in the, complaint, if this, he's taking this numbers from his intern of the internal data he got, and he says in the complaint, if this word got out, if word got out that in fact, this number of users are in fact not generating any revenue because they're not seeing ads, it would be devastating. It would shock the market. He was, I assume, assuming that Twitter would exercise its rights to redact that because it was internal information. And Twitter basically said, go for it. Let's see. It's our business destroyed. Everyone can

see it now. I don't see the meltdown. Everything looks fine here. I'd like to point Elon to the economics of the Candy Crush saga, because I remember people really talking about the digital whales there when it was all up. I want to switch to a completely different topic. Elon's counterclaims are very specific or very intentionally dodged one thing. Elon, when he was acquiring his stake, talking to the board, talking to Twitter, said, if you guys don't take my offer, I will go to shareholders, I will sell my sake, just fire sell my sake, or the one that I think Twitter will really make some hate with is, I will start a competitor to Twitter. And I just want to talk about, like, Elon obviously is trying to dodge that in his counterclaims and Twitter's really starting to hammer them at home.

How does Elon's threatening to start a competitor play into the overall just scope of the trial? It plays in because, remember, one of Musk's claims is that he was denied information he was entitled to get under the merger contract. The merger contract says Twitter can deny him information, if it would pose a competitive harm. So among the many arguments Twitter is making is you stood right there and said you were going to make, do a competitor. Of course we didn't want to hand you the information that you could use to start a competing business.

And that means we had a right, you know, so Twitter has multiple reasons for why they had the right to deny him certain information. And among the reasons they have is fear of competitive harm, which Musk sort of handed them when he said, I'll start in third. I think it also plays into specific performance because now if Twitter, if the judge rules, hey, Twitter is right. Elon shouldn't have breached this merger. You can't just say a billion in damages because not only did Elon cause more than a billion dollars of harm, now he's got all of your internal data, which you can go then use to start a competitor if he wants. Well, yes and no. I mean, the contract says he's not supposed to use the internal data, although it's for a competitor, although of course Twitter will argue, but we see how much he respects NDAs. But again, it really gets back to this issue of whether she feels bound by the billion-dollar damages capital.

It's not whether a billion dollars is enough. There is no universe in which a billion dollars is enough. Like, stipulate it's not enough. The question is whether there's she can, I mean, she can, she can write it on a piece of paper, but whether she'd be legally correct and not overturned in ordering something more or whether she feels, look, it's got to be specific performance or a billion dollars and I don't get a lot, you know. And it's not impossible. She could say, for whatever reason, she feels specific performance is inappropriate.

She could easily say, look, Twitter, you agreed to a damages staff. I really don't know why you agreed to that. They didn't have to. You did. You're stuck with it. You knew it was within my discretion to award specific performance. I've decided specific rewards is inappropriate for such and such reasons. They could include general equities of the situation, whatever it is.

And Twitter, if you don't like it, I don't know why. why you agree to the damages cap? I mean, I don't know why Twitter agreed to a damages cap for knowing breaches, but it appeared to leaving aside whatever holes somebody might find in that contract. The only reason I can come up with that they did that is that it creates such a binary outcome and the damages were almost so certain to be greater than a billion that it wouldn't allow kind of a middle case scenario where they get six or 10 or 15 billion because it's just not going to be enough. If they were given $10 billion, which sounds like a huge cash payment, it is a huge cash payment, that amounts to probably a $20 plus dollar price cut, right,

to the deal. Yeah, I honestly don't know why they. I mean, I think, I mean, I saw at least one professor who I respect who studies these things. He thinks this is, because the thing with merger contracts is you borrow language from other contracts. And this was negotiated in like two days. There is, it is not impossible. And I think somebody, you know, somebody, a friend of my professor, Bob Anderson, I think his view, and I don't want to like misstate his views. But he was speculating that this is just language that they popped in from a private equity kind deal and they just copied it. And that's not impossible when you're when you're doing these kinds of things. You know, like normally you would spend a lot of time negotiating like word by

word. Clearly they did for some things. It's very Twitter friendly this deal. But that part may very well just take it from another deal. Like the one case where, you know, that it was talking about where a chance of reformic ordered specific performance had a very similar kind of damages cap in that conference as well. You know, as you're, I think that's exactly right. Like if you go back to the financial crisis, a lot of private equity firms got to walk away on financing clause and stuff. And I think a lot of contracts have shifted since then to encourage specific performance. I just don't think when people were drafting contracts, they would deal with, they thought they deal with an actor as, maybe not as irrational, but as wild as Elon Musk, right?

Like, if KKR breaks your deal, they're not going to go slam your company on Twitter and try to disparage you through all this. So I'm sure going forward, we're going to see a lot of like disparagement clauses and contracts where, hey, if you go openly disparage us and intentionally break the merger like damages cap gets 15 X or something like I'm sure they're going to be yeah I mean in other cases there have definitely been situations where there's a damages cap for regular breaches and then no cap for knowing and intentional that's been done before and I'm pretty sure is now going to be done again I want just to put a put a bullet on that so is your view she really does or does not have the latitude to pick a third way so to speak I don't see it

But on this, I got to say a lot of really smart people disagree with me, like, or at least are not as certain. And so, like, I don't see it. But then I also, in recognition of my own fallibility, it's one area where given the fact that a lot, you know, this has really been the topic of discussion among us law professors. I mean, there's no corporate president of isn't paying attention to this, but there are some of us who are paying more attention to us. Among those of us who are discussing it, this is where I'd see the most disagreement. So there are some who think that there are possibilities to do more than a billion make up new doctrines or equity or read the contract this way and you hold it up to the light and put some lemon juice, you know, like all kinds of things. So I don't see, but, you know, one way you could interpret it is saying the parties were so sure there would be specific performance that if she's going to, if she's going to simply decline to order it for her own reasons, then she should also decline to honor the damages. That is an argument you could make.

Another argument you could make, though, is Twitter. You knew the risk you might not order specific performance, and you agreed to the cap sucks for you. So, I don't know. In your discussions with other corporate professors and lawyers who are looking at this, is there anything we have in touch upon that you guys are really actually discussing or anything that we kind of gloss over you think we should be thinking about a little harder? I can't think so.

I mean, really, the vast majority of sort of the sentiment among us, is that, you know, with all appropriate caveats about facts that may come out that we are unaware of, this definitely looks like Musk is in breach and Twitter is correct, but the X-factor is with the remedies. I don't want to, if you're not comfortable with this, but right now, I think the market implied probability of Twitter winning is about 70% based on what I'm looking at. Would you say that's too high or too low? I don't think, you guys are the finance guys. I don't think it was nervous.

I had to take a shot. I had to take a shot. Based on everything we've said, everything I've read, I'd feel comfortable saying not financial advice. I am not a lawyer. But I think Twitter's got a much better than 70% chance of winning based on everything we've said. It's a real Hail Mary to see Elon's case here. Compound, do you want to say anything there?

No, no. I mean, I respect the fact that's very hard to set. probabilities on this and the other area where, you know, I'm not sure it's fair to ask Professor Lipton to chime in on this, but really is tying back to the lending agreements and what sort of risks could be embedded in there, et cetera. You know, and so I think anyone who's looking at the situation from an investment perspective needs to dive into that as a secondary risk that kind of comes into play at the end. I agree. But it is a, it's a tail risk, but it will be a risk.

It's a tail risk for sure. I think there was a foot locker case in the financial crisis where there was a specific performance order and then the, and then the bank sued and said, you guys are insolvent, we're not going to lend it. I think the banks actually run. I can't remember for sure, though. But there was something like that. Yeah, I mean, here's the thing. If the banks have very few outs, as I understand it, I'm not a debt contracts expert, so I'm trying to have in my words specific to what I know and nothing else. As I understand it, the banks have very few grounds to walk away. They can walk away basically for the same reason that Musk could,

a material adverse effect. If the banks walk away when they're not entitled to, Twitter can sue Musk to force him to sue them for specific parts. Because Musk would have a claim against the banks. Now obviously he doesn't want to make that claim, but part of specific performance on Musk's part is forcing him to live up to using his efforts to get the financing. And that means suing the banks if they're in the wrong. I've just thought if we go to trial and a judge order specific performance for Elon,

and then a week later, Elon turns and says, oh, the financing is gone. I need to get out of this. I just thought, I think this court. are going to look very skeptfully on, hey, this guy who's been out there tweeting like crazy, who ordered specific performance, and now the finance is not. And I don't think the banks would break their, they have franchises, right? And I think it would be very negative for their franchise unless there was real, real reason. So I think they, yeah, I mean, I mean, this is the topic of discussion and it sort of happened before where a buyer tried to sink its own financing and some

success with it. But I mean, I think it would be very bad for banks that constantly want to finance, if they've made it clear that as soon as a buyer gets cold feet, they're willing to break that contract because the target needs to have some kind of certainty that the financing is really there. Beyond that, what Delaware has done what this judge has done is one time when a buyer tried to sink their own financing, the court said, if it's your reason your financing fell through, we're still going to make you close. Yep. That was the KKK decision which this judge ordered. And on your previous thing, like, if I was a seller and let's say Morgan Stanley broke this and they did it because Elon really leaned on them. I was a seller going forward. I just say, oh, well,

in my contract, like your financing can't be from Morgan Stanley because they'll let you walk. At the very least, I want a specific right to sue Morgan Stanley. I mean, like 20 trillion other rights that Morgan Stanley doesn't sell on the case. So I think they're thinking about that. And one of the things, though, that you see in Musk's papers right now is the lack of reference to problems with financing. It was in his original set of letters to Twitter, he originally suggested that somehow Twitter's conduct was causing a financing problem. He seemed to be setting up an argument that his financing had fallen through and therefore he couldn't go through with it. That's not in his papers now. So if that's his strategy, it's not evident at this time. In your experience, and I know we're wrapping up,

How would you, how would you kind of assess the odds this settles pre-trial, so to speak, or pre-verdict? Yeah, it's everyone's question. And the answer is, I can't, because I don't know. I mean, you look at the surface of this, one of the things about this complaint that's just hilarious and, I mean, the counterclaims, mussels, which is hilarious, but you really have to be in this field to get is one of the things that scat, again, I don't know how much scat and drafted versus Quinn Emanuel, but let's just say scatton. One of the things they're famous for is defending companies against frivolous securities fraud complaints or even meritorious ones. But like you sue a public company, you say we committed fraud under the federal securities laws, usually not this. And Scaden defends to say this complaint has nothing. You can't allege fraud just because they're being compensated based on a metric.

You can't allege fraud just because you think that like some outcomes were bad. And Scadden specializes in this. And I know because my job, before I became a professor, was suing public companies for fraud, and I cannot tell you the number of times I was up against Scadden. So Scadden is now writing the opposite. This complaint is basically Musk saying Twitter, a public company, committed fraud in its SEC filings. And they're making all the arguments that it specializes in knocking down. I mean, it's actually as though they took the worst possible securities fraud complaints they had ever been up against

and cut and paste those arguments. I mean, they must have been so embarrassed writing. I'm like, and you just feel the shame of those attorneys drafting this. So, okay, so getting back to how does this settle? Given that, I cannot figure out what the motivations are here is the problem. Because normally in these things, the buyer makes a lot of noise, but what they really want is to just knock a couple dollars off the price by making a lot of noise and keeping up a fuss.

And it's worth it just to like have this thing done to knock a couple dollars off. You know, that's what a normal situation. I can't tell if that's this situation because, first of all, so much of that complaint has these sort of facial flaws, really. Twitter has very little incentive to settle for a small amount because there is risk. I mean, to a small enough, sure. They have incentive to settle for a small amount, but they don't have incentive to settle for a big one because their legal position is too strong right now anyway.

And so I can't figure out whether this is really must just trying to knock. two bucks off the deal price or something, or whether he really just wants out. And it's possible he just wants out. He's regretting the whole thing. He wants out. And he may very well be thinking something along the lines of. I realize my odds are small, but it's worth it for me to pay a couple million dollars in legal fees if that saves me $44 billion in specific performance. Like, it's worth it to just sort of shoot the moon and try to get out of the deal. And if that's what he's going for, then this doesn't settle. And I honestly don't know. it's it's just been crazy I'm with you and I vacillate so frequently like oh this Elon knows he

overpaid by $20 for share $30 for share everything he's doing is like a rational actor who doesn't really care about reputation but just is seeking a price cut like this is a super rational actor who doesn't care about reputation and then I read some of it and I'm like this is no rational actor like I don't know I mean this the complaint is there's so many so much in the counterclaims that are just strange. There's his tweets, which, I mean, he's going to shitpost his way into paying $44 billion because he can't stop tweeting. You know, like that doesn't seem, you know, that's not crazy like a box.

That's just undermining his own legal claim. Yeah, this weekend's tweets that basically said, hey, just tell me how you do it and I'll close this deal. Those are the ones that maybe gave me, brought back my belief that, okay, maybe he really does just want a price cut you know like those are settlement signals not be like yeah i mean maybe maybe that's it i mean i honestly i just i can't i cannot see it but they were settlement signals that undercut his own leverage for the price cut exactly that's the thing they they they they undercut his own leverage they undermine his own claims i mean he can't claim he cares about

india when he's saying just tell me how you sample 100 people yeah well guys we're we're running very long, but I've really enjoyed this. Compound, thank you so much for doing this. I know we talk all the time. Professor Lifton, this has been great. Maybe we get a settlement, but if not, I'd love to have you again around the trial or something we can catch up, but this has been great. Your coverage has been seconded on, so, or I guess not coverage, but your commentary on. My tweet. Thank you so much for coming on. My new favorite law professor by far. Thank you. He's good guys. And a must follow on Twitter.

Thank you.