Courts

Elon Musk Argues Twitter Flip-Flopping Not Manipulation Because His Legal Case Was So Bad

In a real galaxy brain take, Musk's lawyers claim no reasonable investor could've believed what Musk spent months and massive resources trying to litigate.

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Milken Institute’s Global Conference Held In Beverly Hills

(Photo by Apu Gomes/Getty Images)

Late last week, Elon Musk’s attorneys from Quinn Emanuel offered a new theory for tossing an investor suit claiming that his public bad-mouthing and eventual litigation over his Twitter acquisition was an effort to drive down the share price: no one reasonably could be dumb enough to believe him.

Basically the Animal House defense, “you fucked up… you trusted us.”

Judge Charles Breyer was… skeptical.

After long teasing that he’d buy the social media platform to rid it of bots and promote a vague, self-serving brand of “free speech,” Musk entered into a agreement to purchase Twitter that waived a number of buyer-side protections including due diligence rights. When he soured on the deal — ironically citing the number of bots despite this being the very problem he claimed to be endeavoring to solve — Musk made a public show of trying to get out of the agreement. Twitter sued and Musk fought back until eventually relenting. The plaintiffs in the instant action claim that Musk’s shenanigans were intended to give him more leverage by tanking Twitter’s stock price — costing the plaintiffs hundreds of thousands of dollars.

Musk’s attorneys argued that market investors were aware his flip-flopping position on purchasing the social media company in 2022 was an empty threat because they knew he was legally bound to purchase the company, which Musk has since renamed X.

Though if no reasonable investor could’ve believed Musk had any legal out… then what does that make Musk, the guy who then engaged in months of litigation over this very issue?

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He certainly fought the deal for some reason. Either he hoped to create enough financial pressure to secure a renegotiation or he legitimately thought he could win. Both of those rationales tend to doom his current stance that no investor possibly believed that he wasn’t ultimately legally obligated to carry out the purchase. While Twitter’s case against Musk was about as close to a slam dunk as it gets, Judge Breyer noted that deciding shareholders can confidently crystal ball their way to shrugging off pending litigation is bad policy. “You don’t know of a case that holds that, and I don’t know of a case that holds it either,” he told Elon’s lawyers.

Indeed there were academics AT THE TIME willing to sign their names to a half-baked legal theory that Musk could walk away from the deal. No matter how flimsy this argument was, the fact that the Wall Street Journal wasted ink on it should be proof enough that someone out there believed Musk’s threat to abandon the deal had teeth.

At least baby teeth.

You’ve got to have some sympathy for Quinn Emanuel here because it is, in a sense, the true argument. The overwhelming consensus really was that Musk had no dukes to put up in his fight with Twitter.

But it’s not really all that compelling — at least as a matter of law — when your client spent months publicly arguing the opposite.

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Musk’s New Motion to Toss Twitter Investor Suit Doubted by Judge [Bloomberg Law News]

Earlier: Twitter Complaint Demonstrates That Every Lawyer, Everywhere, Always Is Smarter Than Elon Musk
Elon Musk Will Beat Twitter! WSJ Says It’s Obvious… Assuming You Change Every Single Fact And Law.

HeadshotJoe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

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