Tesla CEO Elon Musk and Twitter are bracing for a authorized battle after the billionaire stated Friday he was abandoning his $44 billion (roughly Rs. 3,37,465 crore) bid for the social media firm.

Twitter is vowing to problem Musk in court docket to uphold the settlement. Shares of Twitter slid greater than 11 p.c on Monday. Here’s a take a look at what might occur subsequent.

Why is musk backing out?

There are plenty of the explanation why Musk may need had second ideas. But he alleged Friday that Twitter has failed to supply sufficient details about the variety of faux accounts it has.

Twitter stated final month that it was making out there to Musk a “firehose” of public uncooked information on lots of of tens of millions of day by day tweets. But Musk’s legal professionals have argued that the corporate was offering Musk with typically “incomplete or unusable information” and fewer information than it presents a few of its huge clients.

Twitter stated final week it makes use of a mixture of private and non-private information to find out the quantity of spam. Private person information is not out there publicly and thus is not within the information “firehose” that it gave Musk. That would come with IP addresses, cellphone numbers and site. Twitter stated such non-public information helps keep away from misidentifying actual accounts as spam.

Twitter has stated for years in regulatory filings that it believes about 5 p.c of the accounts on the platform are faux. But on Monday Musk continued to taunt the corporate, utilizing Twitter, over what he has described as a scarcity of knowledge.

What is twitter’s response?

Twitter declared its intent to sue Musk. The firm might have pushed for a $1 billion (roughly Rs. 162 crore) breakup charge that Musk agreed to pay below these circumstances. Instead, it appears able to battle to finish the acquisition, which the corporate’s board has authorized and CEO Parag Agrawal has insisted he needs to consummate.

The chair of Twitter’s board, Bret Taylor, tweeted Friday that the board is “committed to closing the transaction on the price and terms agreed upon” with Musk and “plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.”

The trial court docket in Delaware steadily handles enterprise disputes among the many many firms, together with Twitter, which are integrated there.

Who’s going to win?

It’s nearly unattainable to foretell the result of any protracted authorized battle. But legislation and enterprise consultants imagine Twitter doubtless has the stronger case.

Morningstar analyst Ali Mogharabi famous that Twitter has described its estimate of pretend and spam accounts for years in regulatory filings whereas explicitly noting that the quantity won’t be correct given using information samples and interpretation.

Given present market situations, Mogharabi stated, Twitter can also have a stable argument that the layoffs and firings of the previous weeks characterize “an ordinary course of business.”

“Many technology firms have begun to control costs by reducing headcount and/or delaying adding employees,” he stated. “The resignations of Twitter employees cannot with certainty be attributed to any change in how Twitter has operated since Musk’s offer was accepted by the board and shareholders.”

The case might additionally finish in a settlement, as an illustration with the 2 sides negotiating a lower cost. If Musk wins, there’s additionally the query of the $1 billion breakup charge. He can definitely afford it, however will he need to pay?

What occurs to Twitter now?

The Musk saga has been, to place it mildly, a distraction for Twitter’s staff, executives and even customers. Some staff have stop, whereas others have been laid off or fired. Job presents have been rescinded and discretionary spending curtailed.

“For Twitter this fiasco is a nightmare scenario,” Wedbush analyst Dan Ives, who follows the corporate, wrote Monday. He stated the end result could be “an Everest-like uphill climb for Parag & Co.” given considerations over worker morale and retention, advertiser considerations and different challenges.”

Twitter itself is unlikely to go wherever no matter whether or not or not it adjustments fingers. But if the turmoil continues it might scare away advertisers. If too many engineers and different staff depart, the platform’s high quality might undergo as properly.

“The one bright spot is that if (Twitter) is ultimately victorious in the courts, it could potentially take north of the $1 billion in break-up fees that Musk could have to pay,” stated CFRA analyst Angelo Zino.

If he loses, will musk comply?

Even if Musk loses the court docket case, some observers marvel if the world’s richest man will abide by the result. That’s partially primarily based on his antagonistic strategy to unfavourable actions from the US Securities and Exchange Commission over Musk’s tweets claiming he had the funding to take Tesla non-public in 2018.

That led to a securities fraud settlement with the SEC requiring that his tweets be authorized by a Tesla legal professional earlier than being revealed. But the SEC later investigated whether or not the Tesla CEO violated the settlement with tweets final November asking Twitter followers if he ought to promote 10% of his Tesla inventory.

Musk had argued that the company cannot take motion about his tweets with out court docket authorization. This time, nonetheless, he might very properly face an precise court docket order to pay the $1 billion breakup charge — or to complete the acquisition even when he would not need to.